Its branches have multiplied in recent years, especially in the provincial capitals of the interior of Türkiye, where they occupy the positions of honor on the main avenues. Its glossy and modern storefronts promise to make their customers' dreams come true: acquiring a house, a car or a store “without the need for credit” or “without paying interest.” They are Savings Financing Companies (TFS, in Turkish), a kind of Islamic savings banks based on the principles of Islamic finance, such as the rejection of interest - although this, like much in Islamic finance, has a trick - and the mutualization of risk: a group of savers contributes monthly installments to a common fund and, in turns or by lottery, each member receives the capital requested to acquire the chosen property.
Some, like Eminevim or Fuzul, have become large business groups. They began their existence as collective savings societies created during the 1990s by businessmen from around political Islam eager to finance themselves outside of banks controlled by the country's—then dominant—secular elite. Others went bankrupt or were liquidated, as they operated in a legal vacuum. Its history changed in 2021, when the government of conservative Recep Tayyip Erdogan tightened solvency requirements, professionalizing them and putting them under the control of the Banking Regulation and Supervision Agency. But above all, its true explosion has occurred since, in 2023, Mehmet Simsek was appointed Minister of Finance with the mandate to reduce an inflation rate that had exceeded 100% year-on-year. He applied the most orthodox manual and urged the Central Bank to raise the price of money, which has meant that banks restrict credit and raise the interest on their mortgage loans above 40% annually (inflation still does not drop below 30%). "Due to financial macroprudence measures, it has become very difficult to access bank loans. Although, at the beginning, the TFS were aimed at low-income people, now they are of interest to white-collar workers and even high-income people who cannot access bank loans," explains Ahmet Büyükduman, financial analyst.
A fixed fee up front
Faced with the high interests demanded by banks – and which imply that you end up paying almost four times the initial capital in ten-year loans – the TFS charge a fixed commission in advance, equivalent to between 7% and 10% of the requested capital. The downside is that you can only access the house, car or business you are going to purchase when you have contributed 45% of its value to the fund, which can happen soon - if part of the capital is advanced or high monthly payment installments are chosen - or take several years. The TFS then mortgages the asset until the client has finished paying the installments, but in the meantime they can use it. Another problem is protecting savings against rampant inflation, since the amount requested by a client at the beginning of the program may have become negligible by the time it is executed. So the TFS have had to establish programs to invest these savings in gold, government bonds in line with Islamic finance (sukuk) or funds.
From the barely 370,000 users that the TFS had three years ago in Turkey, it has grown to more than 1.5 million today, and its size in assets has multiplied by ten to exceed 9,000 million euros. Even so, they barely represent a fraction of traditional banking, and many Turks remain somewhat suspicious: because of the Islamic nature of this system and because some accuse it of being a pyramid scheme, due to the need for new savers to arrive to maintain themselves. But Büyükduman attributes these criticisms to a lack of information: “Banks can also fail if depositors withdraw.” For this expert, the most important thing is that these entities “promote savings before offering a loan” and allow people who work in informal sectors to access financing.
