Beyond the polished Fiats and Fords parked at the Oto Center in a remote working class district of Istanbul, traders tout an investment vehicle that has tripled in value over the last nine years: license plates for taxis that fetch about 1.05 million liras ($580,000).

Prices quoted inside stores that act as a private bourse have risen about 10 percent from 885,000 liras a year ago, with the number of permits issued by Istanbul’s government unchanged for two decades even as the population in Turkey’s commercial capital grew, according to the website. The 4,600 liras a month paid by drivers to rent plates add another 5 percentage points of investment income, the website shows.

Slices of permits called plates, wheels and nuts trade like bonds and lure investors wishing to comply with Islam’s ban on earning interest in a country where almost all of the 80 million population is Muslim. The licenses are an alternative to real estate and resemble investments created by bankers in Islamic finance, such as rent certificates.

The market has become so liquid that “one can sell in half an hour and get the cash in less than a week, not much different from the Istanbul Stock Exchange,” Gursoy Atli, sales manager at Kale Ticaret, one of a handful of closely-held companies that trade licenses, said in a phone interview Feb. 19. There is little regulation and no guarantees.

Attractive Returns

Potential returns of as much as 15 percent look attractive in Turkey, where the yield on two-year lira debt was at 5.81 percent on March 12, down from as high as 11.59 percent in January 2012. The average interest for one-year bank deposits was at 6.88 percent, according to data compiled by Bloomberg. Turkey’s benchmark stock index returned 53 percent last year after falling 22 percent in 2011.

The business of selling licenses has its own bourse, trading jargon, creditors, investors and website. Some cab drivers, who don’t benefit from the trading, say they’re being crushed by a handful of companies that dominate the market.

“What we see here is a typical monopolistic market,” Eser Karakas, an economist at Bahcesehir University in Istanbul, said in a phone interview on March 5. Such a market “cannot operate effectively.”

Wheels, Nuts

At the Oto Center, situated in the Bagcilar neighborhood below the thoroughfare that links Europe to Asia, a quarter interest in a license, called “a wheel,” could be had for 263,750 liras this month. A quarter of a wheel, or a “nut,” goes for about 65,375 liras.

Kale, established in 1979, is “the market maker” and trades at least 20 license plates a day, Atli said.

The roots of the trading date to April 1986, when Turkey restricted the number of taxi license plates in cities, defined who can buy such plates — it has to be Turkish citizens — and authorized local governments to increase the number as necessary, upon approval from the Interior Ministry.

While Istanbul’s population grew to 13.8 million last year from 9.2 million in 1997, the number of taxi licenses has been stagnant at 17,353, according to an official at the Istanbul Metropolitan Municipality, who asked not to be identified, citing government policy.

That translates to one cab per 800 people, compared with a ratio of 662 in New York and 362 in London, based on data from the city governments.

Bank Finance

Turkish banks have been financing the purchase of at least 1,000 taxi license plates across the country each year, according to Turkiye Finans Katilim Bankasi AS, an Islamic lender that has been extending such loans since 2009.

“The volume of such financing totals about 25 million liras a year,” Chief Executive Officer Derya Gurerk said in an e-mailed response to questions on Feb. 21. Turkiye Finans, majority owned by the National Commercial Bank of Saudi Arabia, has itself made about 85 million liras of such loans, he said.

While other big cities also have restricted taxi markets, “none has Istanbul’s pace of population growth and frozen number of licenses,” Karakas said.

For some drivers, this is a ride that has to stop.

“There’s a general assumption that the license plate owner is the person who drives the car,” Asim Golcek, deputy chairman of the Alternative Transporters Solidarity Association, which represents a growing group of unmarked, unlicensed cabs, said in an interview on Feb. 21 at the headquarters of his organization in a backstreet in the Gungoren district, not far from the Oto Center. “Nothing could be further from the truth.”

Erdogan’s Vow

Prime Minister Recep Tayyip Erdogan vowed to fight against the unlicensed cabs in 2011 as he took steps to deter business in the unregulated economy. “God willing, we will enact much more serious and deterrent legal measures,” Erdogan was cited as saying in Istanbul by the state-run Anatolia news agency on April 29, 2011. “We will not allow this to go on.”

A law enacted in June last year imposed penalties, such as a 60-day ban from traffic, on those who drive regular cars for commercial purposes and also fines on those who pay for travel in such cars. Golcek’s organization estimates Istanbul has about 40,000 unlicensed cabs.

Registered taxi drivers, who work as long as 12 hours a day, on average must pay about 120 liras ($67) a shift to license plate holders, Golcek said, adding that the figure was expected to rise after the Feb. 23 fare increase of 8 percent.

“The driver can keep the rest to feed his family — if there’s any left,” he said. “Sometimes drivers end up paying money from their own pockets after working for 12 hours.”

A Transport Ministry official asking not to be identified because of government policy said the matter of increasing the number of licenses is related to local authorities. An official at the Istanbul Greater Municipality declined to comment.

License plate owners and drivers who work in their cabs have “turned into some sort of a pressure group,” with even governments refraining from taking action against the restricted market, Karakas of Bahcesehir University said. “This is a terribly unjust system, and I frankly have no idea how it can be fixed.”

Editors: Philip Revzin and Laura Zelenko.

To contact the reporter on this story: Taylan Bilgic in Istanbul at To contact the editor responsible for this story: Laura Zelenko at

Photo Credit: Taxis sit in traffic in front of the Sultan Ahmed Mosque, popularly known as the Blue Mosque, in Istanbul.