Akyuz foresees the country’s interest-free assets increasing by 30 percent to $60 billion in 2015, up from 1.2 percent growth in the 12 months through November, the latest reporting period. The association, which represents Turkey’s four Islamic banks, is also working to introduce new debt instruments, Akyuz said in answers to written questions. He declined to elaborate.

The AKP government, one of the most overtly religious in the history of Turkey’s secular republic, wants to increase the share of Islamic banking to 15 percent in 2023 from about 5 percent now. The three state banks -- Ziraat Bank, Vakif Bank (VAKBN) and Halkbank -- have pledged to quickly set up units for Shariah-compliant banking, long the preserve of four smaller lenders.

While “the existing players will have to review their policies and strategies,” the competition represents a healthy challenge to the four Islamic lenders” said Akyuz, who was formerly the chief executive officer of Albaraka Turk. (ALBRK)

Progress toward the government’s target was stalled last year by the contraction at Bank Asya (ASYAB), formerly the country’s biggest Islamic bank.

Its assets fell by almost half through the third quarter of 2014 as it got caught in a political dispute between Turkish President Recep Tayyip Erdogan and his former ally, a cleric whose followers founded the bank. The lender’s ability to issue new debt was rescinded, and state companies withdrew their business.