Central Bank of the Republic of Turkey (CBRT) Governor Murat Uysal said, “We will continue to quickly take the decisions that our country and economy will need in the coming period and implement the decisions taken effectively.” said.
In his speech at the special session within the scope of the 12th International Conference on Islamic Economics and Finance, held online, Uysal said that a significant amount of capital inflow occurred to developing countries after the global financial crisis, but there are still financing-related difficulties in achieving sustainable growth and development for these countries.
Stating that this situation has led to the acceleration of the search for a sustainable and long-term financing model that can be an alternative to the financial system based on debt and leverage, Uysal said, “The ideal is for financing sources to increase production and employment by financing both infrastructure and private investments and to encourage new investments in public finance.” Thus, it also contributes to social policies.” said.
Noting that Islamic finance is based on risk sharing with its asset-based financing structure, Uysal also explained that features such as “a solid financial infrastructure”, “reduction of income inequality” and “contribution to financing issues sensitive to environmental problems” bring Islamic finance to the fore.
Emphasizing that the global Islamic finance sector has grown significantly in the last 10 years and reached an asset size of 2.44 trillion dollars as of 2019, Uysal said, “On the other hand, considering that its share in the global financial sector is only around 1 percent, it seems that the sector still has a significant growth potential.” he said.
Referring to the development of the Islamic finance sector in Turkey, Uysal explained the activities carried out in this field.
Stating that the number of participation financial institutions in the country has reached 6 as of this year, Uysal said that participation financial institutions achieved a growth above the banking sector average in the 2015-2019 period, and that the asset share, which was around 2 percent in 2005, has increased in the last 2 years with the establishment of public participation financial institutions. It reported that it increased by over 20 percent and reached 6.5 percent as of March.
“CBRT contributes to the development of the participation finance sector”
Murat Uysal stated that the CBRT contributed to the development of the participation finance sector in parallel with the increasing importance of interest-free finance, and touched upon the regulations they made and the practices they implemented in this field.
Uysal stated that participation financial institutions, which have recently started to take a more active role in the foreign exchange and currency markets within the Central Bank, have started to increase their swap transactions, especially with the CBRT.
Stating that the CBRT closely follows and contributes to studies on a global scale by becoming a member of international organizations working in the field of Islamic finance in order to support the development of the sector, Uysal reminded that they have been one of the founding partners of the International Islamic Liquidity Management Organization (IILM) since 2010.
Stating that the participation finance system supports participatory and inclusive growth by emphasizing partnership agreements and risk sharing, he said that it is beneficial to carry out various studies to increase the awareness of the system and to better benefit from its potential.
Uysal said, “I would like to express that the timely implementation of a comprehensive communication strategy to raise awareness in the field of participation finance and strengthen trust in the sector can further increase the momentum gained by the sector.” said.
Pointing out the importance of the development of the participation finance system for the country’s economy, Uysal said that they, as the CBRT, can offer all kinds of contributions in this process.
“Uncertainty about the course of the epidemic weakens the global growth outlook”
CBRT President Uysal stated that the rapid spread of the coronavirus epidemic around the world has caused a significant slowdown in global trade and economic activity, and that the environment of high uncertainty regarding the economic effects of the epidemic and the normalization process has significantly weakened the global growth outlook.
Referring to the policy measures implemented by central banks all over the world in this process, Uysal said, “It is important to ensure recovery and minimize the costs on different segments by supporting households and companies most affected by the epidemic.” said.
Touching on the critical importance of multifaceted and micro policy practices in response to the epidemic, Uysal continued his words as follows:
“There are serious uncertainties regarding the duration and size of supportive policies, depending on the determination of the damage that will occur in the economies in the coming period and the speed of normalization. The announcement of unprecedented measure packages in developed and developing countries means that budget deficits will expand in the post-epidemic period and public and private sector indebtedness will increase. “It points to an outlook where global interest rates will remain low for a long time. In this process, it is of great importance that policy steps are targeted and temporary with an understanding of effective resource management, in terms of limiting the negative effects of the epidemic and preventing the possible side effects of expansionary policies.”
“The steps we take aim to get through the process with the least damage.”
Murat Uysal emphasized that the monetary measures they have taken recently aim to overcome this period with the least damage by supporting production and financial stability in the economy, and said, “In order to limit the negative effects of the developments related to the coronavirus, it is important that the financial markets, the credit channel and the cash flow of the companies continue to operate uninterruptedly and healthily.” “does.” said.
Uysal stated that for these purposes, they took timely, target-oriented and predictable steps to meet the increasing liquidity needs of the system and to ensure the uninterrupted continuation of credit flow to the real sector by closely monitoring the process and its effects, and explained these steps.
Uysal noted that they took steps to support the liquidity in the government securities market within the limits they determined in this process, and said, “In addition, by including Asset-Backed Securities and Mortgage-Backed Securities in the collateral pool, we aimed to deepen the capital markets and diversify the liquidity opportunities that financial institutions can use by providing quality collateral.” he said.
Reminding that they announced that they will use 20 billion lira of the facility allocated for TL denominated rediscount loans as advance loans with investment commitments in a more efficient way, Uysal said that with this step, investments that are highly productive, reduce imports and support exports will be encouraged, foreign dependency and the current account deficit problem will be reduced, and sustainable growth will be achieved. He said that they aim to support it.
“We will continue to use all the tools we have”
CBRT President Uysal stated that they aim to support financial stability and the post-epidemic recovery process by providing the financial system and the real sector with the liquidity they need under appropriate conditions, with the steps they took, and made the following evaluations:
“Thus, we aimed to minimize the damage that the effects arising from the temporary epidemic environment may cause to production and employment in the long term. As a matter of fact, we observe that the measures aimed at getting through this period with the least damage by supporting production and financial stability in the economy support the liquidity and credit conditions of the financial sector and preserve the effectiveness of the monetary transmission mechanism.
“We will continue to quickly take the decisions that our country and economy will need in the coming period and implement the decisions taken effectively.”
Emphasizing that they, as the Central Bank, have a wide and powerful tool set at their disposal to minimize the negative effects of the epidemic, Uysal said, “In this period, we will continue to determine our monetary stance to ensure the continuity of the decline in inflation and to use all the tools we have in line with the aims of price stability and financial stability with a data-oriented approach.” “We will continue. As we constantly emphasize, price stability contributes to sustainable growth by reducing uncertainties in the economy and supporting the growth potential of the economy, and healthy and inclusive growth strengthens the sustainability of price stability.” he said.
