* IDB targeting at least 10 pct stake in Borsa Istanbul
* Expects to finalise negotiations in 2-3 months
* Follows increase in IDB financing over past 2 years
* Plans come ahead of Borsa Istanbul's own IPO
By Bernardo Vizcaino
April 19 (Reuters) - The Saudi-based Islamic Development Bank (IDB) plans to take at least a 10 percent stake in Turkey's state-run stock exchange as the multilateral lender ramps up activities in the country, a senior official of the bank told Reuters.
IDB expects to finalise negotiations with Borsa Istanbul in two to three months as part of wider efforts to develop Islamic finance in Turkey, said Abdulhakim Elwaer, IDB's director of cooperation and resource mobilization.
Equity investments are rare for the AAA-rated IDB, which focuses primarily on extending trade financing and grants across its 57 member countries, but Turkey is seen as a key market to expand the reach of Islamic finance.
"The larger picture is IDB's cooperation with Turkey, this is only one engagement. We want to help develop Turkey as a global Islamic financial centre," Elwaer told Reuters late Tuesday.
IDB and Borsa Istanbul signed a cooperation agreement in November, with discussions currently ongoing to decide on a specific size and time frame for the stake, he added.
The bourse has a share capital of 423 million lira ($115.6 million), implying a value of 42.3 million lira for a 10 percent stake.
Borsa Istanbul could not immediately be reached for comment.
The exchange is majority-owned by the Turkish government via its sovereign wealth fund, but also includes a 10 percent stake from the European Bank for Reconstruction and Development and a 7 percent stake from NASDAQ.
Borsa was created in 2013 after the merger of the Istanbul Stock Exchange, Gold Exchange and Derivatives Exchange, ahead of plans for an initial public offering.
The proposed stake follows an increase in IDB activity after it opened a dedicated office in Ankara, with Turkey now the fourth-largest recipient of IDB financing.
The IDB has approved over $10 billion in financing to Turkey since 1977, with around a third arriving in the past two years.
It extended financing worth $1.5 billion in 2016 and $1.4 billion in 2015, mostly in the financial and transportation sectors.
This included a $270 million financing for Turkey's Eximbank and a $300 million financing for a sharia compliant bank dedicated to Islamic endowments, Vakif Katilim Bankasi.
"Hopefully we can replicate this across other member countries," said Elwaer.
The IDB has also listed its Islamic bonds (sukuk) in Borsa Istanbul and plans to jointly develop similar tools for infrastructure financing in Turkey, said Elwaer.
A gold trading platform is also in discussion, although the equity stake remains its biggest priority, he added. ($1 = 3.6581 liras) (Additional reporting by Can Sezer in Istanbul; Editing by Sam Holmes)