Erdogan: Banking system interest rates should not be applied to participation finance
President ERDOGAN who made a speech at the “New Horizons in Alternative Finance” program held at the Marmara University, said banking system interest rates should not be applied to participation finance.
In his speech the President also shared that the subject of alternative finance on which the Presidential Finance Office and the University of Marmara worked together would bring a new breath to the economy.
The President noted that Turkey had to go forward in economy and financial systems as its integral part continuously, like in every other area and create its own models and said “We have to create their own models. Those who have a say in the world economy imposed their models but it did not work even in their homelands. One of the most important signals for this was the global financial crisis in 2008. Although they tried to direct attention to other points, it is a fact that the real source of said crisis was America and Europe“.
President Erdogan said, “This unhealthy structure is unsustainable” and stated that the financial system, whose main function in the economy was to bridge the savings and real investments, could not fulfill its duties properly and that the system which should contribute to the increase of production and welfare had unfortunately dominated the whole economy and threatened the stability”.
He went on to say “It is inevitable for this economic system, which operates only with the ambition to earn more, without considering social and human costs, to collapse. We cannot sit and wait for this order to collapse while the distribution of income and wealth in the world is deteriorating. Therefore, the global economic and financial system should be transformed in no time, and the construction of a human-oriented structure where production is essential should be started. The reason for our opposition to the system is not only our belief that does not accept it, but also the fact that the human burden of the system has become heavier”.
President Erdogan added that he believed an interest-based system would be replaced by a new financial architecture in the future, in which participation in risk sharing would be essential.
Erdoğan stated that they had taken steps towards the growth of the non-banking financial sector turning the crisis into an opportunity and went on to say, “Necessary support should be given to the real sector. Who will do this? We have entered this period now with the participation financial system. With our new development plan and new economic program, we implement a series of measures aimed at increasing the share of the capital market. We are developing new applications for SMEs in order to provide our companies with the financial resources they need in a healthier way. We expect capital markets to spread to the bottom and capital markets that provide direct access to finance to increase their weight in the system. Increasing use of savings in capital markets will ensure the success of these efforts.“
Erdogan said the share of “participation financial institutions” in total banking assets was about 5 percent and added that they needed to pull this rate much higher. He added, “Our aim is increase this figure to 15 percent by 2025.”
