THE RIGHT OFFERING

Turkey 2013 | FINANCE | INTERVIEW

TBY talks to Reşat Karabıyık, Managing Director of Bizim Securities (BMD), on the growth of interest-free investment products and Turkey's capital markets.

Reşat Karabıyık
BIOGRAPHY
Beginning his career as an auditor in Ülker Group in 1994, Reşat Karabıyık stepped into capital markets in his career with the Crown Investment Trust. He has served in many areas of the sector such as corporate finance, accounting, research, and fund management over a period of more than 15 years. He is currently General Manager of Bizim Securities.

How has Bizim Securities (BMD) grown and developed since 2003?

BMD started as a boutique investment institution in 2003, and began with an agency agreement with Family Finance. We started offering capital market services to the clients of private finance houses in 2003. Although we are a conventional company, we developed know-how in interest-free investment products. Family Finance was similar to Islamic-style banks abroad, which have been called “participation banks" since 2006 in Turkey. Before 2003, there were no compliant interest-free investment vehicle products in Turkey, and no regulations. The regulations have changed and become more flexible to cover interest-free investment products and tools. In 2003, the finance houses as they were became participation banks and are now regulated by the banking laws. We work with all four Turkish participation banks at the moment, and are their exclusive investment institution. BMD provides capital market services and products for all of the participations banks' clients, including brokerage services and other integrated investment services, such as investment consulting, IPOs, asset management, and similar investment services. That is where most of our growth comes from. We have developed an expertise in Turkey, and now this is the only institution that has an exclusive partnership with more than one bank and serves as an interest-free capital market service and products provider. We started with a few hundred clients, and now have over 50,000. We are almost in the top 10 in terms of assets under custody in Turkey, and we are in the top five in terms of corporate finance revenues coming from IPOs, M&As, and similar activities. We are one of the largest brokerage houses in Turkey in terms of client size and assets under custody.

How would you characterize the demand for access to capital markets among interest-sensitive investors?

At the beginning, it was huge because there had previously been no market at all. The growth rates naturally became very high, some at 300% or 400% per year. We started with a few hundred clients in 2003 and by 2007 we had close to 20,000 clients. Since there were no products to supply, we provided investment funds and brokerage services for participation banks. The demand was comparatively large. It has diminished over time, but we have been the fastest-growing brokerage house in Turkey since 2006. Back then, we started with one bank, Türkiye Finans, then made an agreement with alBaraka in 2007, Kuveyt Türk in 2008, and Bank Asya in 2009. As we made agreements with the banks, the clients came from these institutions to us. We saw both types of clients; the first being those who had worked with conventional institutions before and who were the clients of participation banks. When they heard that we provided investment services, they came from those institutions. The second type of customer had never been introduced to the capital markets at all; they were fresh, new clients who hadn't been trained or introduced and didn't know anything about the kinds of products on the market. We are trying to push products through participation banking channels. Usually, we are the initiator of demand by introducing products and explaining what these products do. Both people and institutions need to be aware of the products that exist. Because the participation banks never worked in this way, they were not aware of how we investment bankers can add to the value of an institution. This is transforming gradually.

What was the significance of the Participation Index to interest-free finance in Turkey?

It is a fruit of the process that began in 2003. Back then, the participation-banking sector had no products at all and the Participation Index defined the standards of interest-free investments and equities in Turkey for the first time. To me, this is the most important part of the Participation Index. Turkey didn't have regulations or sector standards. We are the initiator because we have worked with all of the participation banks in Turkey, and we know their expectations and demands for these standards. These are the mutual standards approved by all of participation banks. The other important part is that it's an index in which we can establish investment products, such as ETFs. Now, we expect an increase in the number of licensees. BMD is not an index provider company, but there was no other institution that could do the job, and so we stepped up to the plate.