Participation banking

Participation Banks are banks which collect funds through private current or participation accounts and provide loans. They went into operation by the name of "Private Financial Institutions" based on the Council of Ministers decree dated 1983, no 83/7506. They have been named "participation banks" by the Banking Law no 5411 entered into force in 2005 and all their activities fell within the Banking Law. Structure of participation banks is based on "interest free banking" and "profit and loss sharing" principles. To ascertain if participation banking's operations are compatible with "passive banking" and "profit and loss sharing" principles, first we must analyze the concepts "interest", "profit", "share of profit" and see the deposit banks fulfilling traditional banking activities in Turkish law, and their operations. Also the methods of depositing funds and disposition of funds by participation banks must be argued out. Participation banks' philosophy of establishment has his grounds on the Islamism's prohibition of interest, so, it will be appropriate to analyze such studies comparatively in Turkish and Islamic laws. Participation banks' methods of depositing funds are "private current account", "participation account" and "syndicated loan". On methods of depositing funds of participation banks, we must illustrate separately Turkish law's practices and concepts and global practices and concepts. Inspiring by corporations issuing bonds, an instrument of capital markets named "sukuk" have been created for the diversity of fund deposition. Sukuk designate the "leasing certificate" in Turkish law. Key words: Bank, Participation Bank, Interest, Profit, Share of profit, Interest free banking, Profit and loss sharing, Private current account, Participation account, Syndicated loan, Sukuk, Leasing certificate