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Sukuk Financing
Turkey had various previous experiences with interest free financ-
ing in the form of profit-loss sharing certificates and real estate certifi-
cates mainly used for the financing of large infrastructure and con-
struction projects. The issuance of sukuk was initially regulated with
the Capital Markets’ Board (“CMB”) Communiqué Series III, No. 43
on Lease Certificates and Asset Lease Companies (“Communiqué
Series III, No. 43”) in 2010. Communiqué Series III, No. 43 regulated
lease certificate (
sukuk
) issuance in a broad manner without specifics
and several issuances were realized under it. In 2013, it was abolished
by the Communiqué Series III, No. 61 on Lease Certificates
(“Communiqué”). In 2012, Law No. 6327 was introduced allowing for
the Undersecretary of Treasury to issue sovereign lease certificates.
Statistics of the Organization of Islamic Cooperation indicate that
Islamic banking in Turkey has not received the same level of interest
as compared to other Muslim countries and is far from saturation. As
such, the sukuk market is yet to develop. In fact, the first sovereign
sukuk issuance was realized in August 2013 with significant over-sub-
scription closing at USD 8 billion which shows huge demand for
sukuk.
Legal Framework
As is known, sukuk holders obtain a partial ownership over a spe-
cific asset enjoying the profit that such asset generates and the pro-
ceeds from the sale, if sold.
The Communiqué introduced five types of lease certificates con-
sisting of certificates based on ownership (
ijara sukuk
), management
(
musharakah sukuk
), trading (
murabaha sukuk
), partnership
(
mudarabah sukuk
) and engineering, procurement and construction
(EPC) contracts (
istisna sukuk
) or through the combined use of these
different types. Yet lease certificates that may be issued are not limited
to these, as the CMB is receptive to novel instruments.
The legislation also regulates the establishment and management
of asset leasing corporations (“ALC”) and their capacities. ALCs may
issue more than one lease certificate at a time and may issue for com-
panies that are not the originating company.
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NEWSLETTER 2014