Evaluation of participation banking in Turkey over performance and positioning and suggestions for growth

Abstract

As stated in the Holy Qur’an, in the Bakara, Ali Imran, Nisa and Rum suras, the interest (ribâ), which is a type of gain that is not obtained by working and producing, is defined as haram. However, the payment of interest at a certain rate to the collected deposits has become an ossified practice in the classical banking sector, which has been tasked with forming the basis of contemporary economic systems. In the countries where only classical or traditional banking institutions and organizations exist, depositors with the abovementioned sensitivities do not want to transfer their savings to the banking system; instead, they intend to use their savings in types of investments such as gold, foreign exchange, and real estate, which are not directly utilized in production. As a result, these funds cannot contribute directly to the economy of the country. Islamic banking practices have emerged to prevent this situation. The first Islamic bank in the world was established in Egypt in 1963 (Kara, 2006: 11), and in the following years, the Islamic banking sector has spread rapidly in Gulf countries such as Saudi Arabia, Bahrain, Iran; Malaysia, Tunisia, and other countries with the majority of the population being Muslim, and in countries such as the United Kingdom (Yanıkkaya and Pabuçcu, 2017: 48). Since its emergence, the Islamic banking sector has made significant progress worldwide in terms of market share and industry size. The vast majority of the population in Turkey is also Muslim, and the need for Islamic banking practices in this country has led to the industrialization of this sector in Turkey.