Turkish markets in turmoil: Anything but a delight for investors

Joshua Brockwell is Investment Communications Director at Azzad Asset Management. He can be reached at joshua@azzadfunds.com A selloff in Turkish markets over the last few days has reverberated around the globe, prompting investor flight to safe havens like U.S. Treasuries, the Swiss franc, and the Japanese yen. Turkey’s inability to prop up its tumbling lira, prompted in part by diplomatic tensions with the U.S., led to the currency’s largest losses since 2001 on Friday. Turkey has faced economic difficulties since the start of the year. The lira has lost more than 40% of its value this year thanks to presidential intervention in central bank policy, fiscal stimulus, growing inflation, and a hefty current account deficit. As markets remain jittery over possible spillover effects, investors are left to piece together the real impact of recent events on their portfolios. Is the Turkish economic engine stalling out? Could contagion there spread to foreign shores? If Turkey wants to right the ship, it’s clear that more of the same cannot continue. Until things level off, financials and emerging markets look likely to lag. Bank exposure Reports on Friday suggested that the European Central Bank (ECB) is concerned about southern European banks, which have

August 14, 2018 No Comments

Bridging the wealth gap: What to do about global inequality

A January 2017 report issued by Oxfam found that the eight richest individuals in the world have a net wealth of $426 billion–equivalent to the total amount of wealth held by the poorest 50% of the global population (some 3.7 billion people). That same report found that the world’s 10 largest corporations together have revenue greater than the 180 poorest countries combined. Impact investing has a role to play in addressing this shocking inequality of wealth. Although many tools are necessary to reduce wealth disparities, participation banking and trade finance are especially promising and should be supported by the investor community. Participation banks: Serving the underserved Public perception of the finance industry holds that it only exists to benefit the rich, exacerbating the wealth gap and entrenching inequality. While this may be true in many cases, participation banking is different. Part of the community banking movement, participation banking requires financial institutions share responsibility for the poor in society. Each bank takes part in socially responsible activities by setting aside a certain amount of its total funding sources to serve the community in which it operates. One example of the better banking behavior common among participation banks is providing interest-free loans

January 25, 2017 No Comments

Turkey’s failed coup creates an unlikely winner: Islamic banking

As the Turkish people pick up the pieces following the attempted military takeover of their government on June 15, speculation about the country’s economic future is rampant. From a slump in capital and credit markets to a downgrade in the country’s sovereign credit rating, many pundits are bearish about the long-term prospects for the republic. At least one sector, however, is standing strong after the coup attempt: Islamic banking. As a dual financial system that practices both conventional and Islamic finance, Turkey was introduced to Islamic lenders (or “participation banks,” as they’re known there) at the end of 1980s, and the sector grew rapidly by the beginning of the 2000s. In 2005, the Islamist-oriented government officially recognized them and offered state guarantees on deposits, attracting interest from religious depositors and nearly doubling the industry’s market share by 2013. Growth over the last few years has also been compelling. The Participation Banks Association of Turkey reveals that total assets in five Turkish Islamic lenders grew to 120.3 billion Turkish lira ($33.6 billion) in 2015, an increase of more than 15% from the previous year. And there is more room for expansion, considering the size of Islamic lenders as compared to the

July 27, 2016 No Comments