charged with the responsibility of assisting in the promotion of foreign trade especially in capital goods, among member countries ; providing technical assistance to member countries ; and extending training facilities for personnel engaged in development activities in muslim countries to conform to the islamic law. ladies and gentlemen, in the turkish context, the islamic finance practices are embodied in a uniquely defined compartment of the banking system. these banks are called as the “ participation banks ” in turkey and they constitute an integral part of the turkish banking system. there are four islamic banks categorized as participation banks, and 45 conventional banks in turkey as of september 2009. it is crucial to highlight that the participation banks are not considered as an alternative to the conventional banks. while they are functioning similar to deposit banks, their fund collecting and lending processes differ significantly. participation banks are authorized by the turkish banking act to collect funds from the public under the “ profit and loss participation accounts ” and the “ special current accounts ”. the profit and loss participation accounts are essentially a version of the islamic financial instrument, where the bank utilizes the funds deposited by account holders to fund specific business activities. any profits earned are shared between the account holder and the bank, in proportion to an agreed ratio. participation banks in turkey mainly offer two types of lending. the first type of financing is murabaha, which is a transaction consisting of two sales contracts. the first contract involves a bank client requesting the bank to undertake a murabaha transaction and promising to buy the commodity specified by him or her if the bank acquires that commodity. the second contract involves the client purchasing the commodity acquired by the bank on a deferred payment basis and agreeing to a payment schedule. the second type of financing is financial leasing or ijara, with terms similar to those offered by other leasing companies. participation banks currently constitute only a small part of the turkish banking sector, accounting for 3. 7 percent, 4. 2 percent, and 5. 2 percent of total banking sector assets, deposits, and loans, respectively, at the end of 2008. however, they have been expanding rapidly in recent years. the share of participation banks ’ assets in total banking sector rose from 1. 9 percent in end - 2002 to 3. 7 percent in end - 2008. they have provided finance to mainly small and medium size dynamic firms. at present, participation banks are regulated according to the same standards as conventional banks. accordingly, they are regulated and supervised by the banking regulation and supervision agency. distinguished guests, while

purchasing of the real goods and services. in islamic finance, islamic financial institutions should own and possess the real goods and services and the buyers of the real goods and services should want to take delivery. therefore, stakeholders share profits in good times, and losses in bad times. distinguished guests, there is ample room to improve islamic financial system, more specifically on regulatory and supervisory side. while the high growth rate of the islamic financial institutions is expected to continue in the coming years, they maintain certain market risks such as reputation and liquidity risk. liquidity management is difficult under islamic finance rules as practical instruments in accessing liquidity are limited. however, islamic financial institutions, being aware of the limits in liquidity management, sustain higher liquidity ratios compared to conventional banks. similar case is valid for their capital ratios. moreover, the lack of technical and contract standardization seems to weaken the potential of islamic finance, as an alternative financing against the conventional financial institutions. besides, the customer base needs enlargement including household services. the regulation and supervision framework of islamic financial institutions should also be improved. in conclusion, the current crisis has given an opportunity to islamic financial institutions to prove their potential. as their products limit the excessive leverage and the disruptive financial innovations, they have confirmed their products ’ advantages to ensure macroeconomic stability. this may lead the way for islamic financial institutions to expand and improve. dear guests as you may know, the central bank governors of the organization of islamic conference gathered yesterday in istanbul upon the invitation of the central bank of turkey on the 40th anniversary of the oic and 25th anniversary of the standing committee for economic and commercial cooperation of oic. the purpose of that meeting was to make a meaningful contribution to the ideal of reaching a sustainable and stable global order based on the principles of justice, equity, participation and freedom fort he humanity to reach peace and prosperity that embraces differences between the civilizations as a source of richness and not as a reason for clash. our objective is to make these meetings permanent that convenes regularly every year to stipulate our common views and decisions regarding the issues that concern the member countries. once again i extend my warm welcome to all participants. i also want to thank the distinguished participants for their valuable contributions. i hope you enjoy both the conference and your stay in istanbul. thank you.