Sharia-compliant banks have occupied only a small proportion of Turkey’s banking market to date, but with rising global demand and the government’s focus on Islamic finance, that looks set to change.

Having enjoyed a highly profitable first half of the year, Turkish banks are now having to change strategy due to US monetary policy and turbulence closer to home.

Turkey is a relatively new market for sukuk issuance compared with Malaysia and the Middle East, but its Islamic banks are now at the forefront of subordinated sukuk structures, led by Albaraka Turk and its innovative murabaha issue.

In Turkey, banks have stopped talking about alternative delivery channels. They consider all channels – including branches, ATMs and mobile – a core business, and this rise in digital banking is spurring competition and, as a result, innovation.

As part of its drive to make the country more attractive to international investors and strengthen its economy, Turkey has kick-started a series of capital markets reforms by bringing its three exchanges under one roof, thus establishing the Borsa Istanbul.

Vakibank's five-year plan to upgrade its IT infrastructure and completely remake its core banking application is ambitious but, according to CIO Ali Engin Eroglu, it is vital if the bank is to keep pace with Turkey's technology-focused banking sector.

DenizBank's modern, nimble IT system has a series of admirers in the banking world, and includes none other than Bill Gates among those who it has impressed. The bank's chief operating officer tells The Banker how DenizBank is now ready to take its IT knowhow to a wider international audience.

Turkey’s government wants to establish Istanbul as an international financial hub in time for the country’s 100th anniversary as a republic in 2023. The country's geographical location certainly works to its advantage, but it has much to achieve in just 10 years. Will it succeed?