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Turkiye Emlak’s green Sukuk: A first for Turkey

Turkiye Emlak Katilim Bankasi (Emlak Participation Bank), one of six fully-fledged Islamic banks in Turkey, has made its return to the capital market with its first green Sukuk facility — also the country’s first. NESSREEN TAMANO reports.

The green lease certificates, worth a total of TRY51.8 million (US$5.16 million) and based on a risk-and-profit-sharing structure, were the first to be issued under Emlak Bank’s recently launched Sustainable Finance and Green and Social Sukuk Framework, which was designed in line with the International Capital Market Association’s Green Bond Principles and the IsDB’s Sustainable Finance Framework.

Nevzat Bayraktar, the general manager of Emlak Bank, said that the lease certificates were uniquely structured to contribute to the sustainable growth of the sector. “With this issuance of green Sukuk, Emlak Bank has made an annual contribution of approximately 2,000 tons in carbon emission reduction.”

Proceeds from the issue will be used to finance projects under a Special Fund Pool established to focus on initiatives that contribute positively to climate change and the environment.

As at the 15th November 2021, the calculated return for the lease certificates under the Special Fund Pool is 16.26%.

“We aim to create financing models that support sustainable investments and take into account environmental, social and governance criteria for the development of the country,” Nevzat said. There are also plans to issue another green Sukuk by the end of 2021, the bank told IFN.

Emlak Bank regularly issues Islamic lease certificates under its TRY2 billion (US$199 million) Sukuk program; in 2020, it issued a total of TRY1 billion (US$99.5 million).

The bank plays a key role in providing financing to the Turkish real estate sector, and was last year reportedly considered to be one of the banks in a planned three-way merger to establish a Turkish Islamic megabank, along with Ziraat Participation Bank and Vakif Katilim Bank as per the instructions of President Recep Tayyib Erdogan.

Turkiye Emlak Katilim Bankasi’s Sukuk
TRY51.8 million

10th November 2021
IssuerEmlak Katilim Varlik Kiralama
ObligorTurkiye Emlak Katilim Bankasi
Issue sizeTRY51.8 million (US$5.16 million)
Use of proceedsTo fund long-term green projects
Tenor371 days
Maturity date16th November 2022
Profit rate / payment termsVariable-yield security; The profit generated from the Special Fund Pool will be shared between the Rabb Al-Mal and Sukukholders on a predetermined sharing ratio of 90/10 monthly
Joint lead manager / bookrunnerTurkiye Emlak Katilim Bankasi
Governing lawTurkish law
Legal advisorMutlu Avukatlik Ortakligi
ListingBorsa Istanbul Stock Exchange
Underlying assetsGreen Murabahah projects
Shariah advisorEmlak Bank’s Shariah Committee
StructureMudarabah
TradabilityYes
Investor breakdownAbout 83% are from Islamic pension and investment funds; 7% from natural and legal persons

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