Contributions of participation banks to the economy: A comparison of Turkey and selected countries

Participation banking, which has become widespread in the world, continues to develop rapidly in Turkey with the entry of public banks into the interest-free finance sector in recent years. Participation banks, which operate far from interest, take place in the finance sector within the Islamic framework and are an alternative to all other banks. These institutions, which have made serious contributions to the country‟s economies, aim to eliminate the negative effects of interest from human life and to attract idle funds that do not participate in the financial world due to interest into the system. Participation banking, which has become widespread in the world, continues to develop rapidly in Turkey with the entry of public banks into the interest- free finance sector in recent years. Participation banks, which operate far from interest, take place in the finance sector within the Islamic framework and are an alternative to all other banks. These institutions, which have made serious contributions to the country's economies, aim to eliminate the negative effects of interest from human life and to attract idle funds that do not participate in the financial world due to interest into the system. This thesis examines the important role played by participation banks in ensuring economic growth and stability, focusing on a comparative analysis between Turkey and selected countries. Preliminary findings reveal that the non-interest-based financial model of participation banks contributes significantly to economic stability, especially during the global financial crisis. These banks play a crucial role in increasing financial inclusion, supporting sustainable development and building resilience in the face of economic volatility. However, performance and impact differ between countries due to different regulatory environments, levels of economic development and cultural factors. This study contributes to the existing knowledge by providing a comprehensive analysis of the economic contributions of participation banking and thus fills the gap in comparative studies between Turkey and other countries. It also provides policy recommendations for optimizing the potential of participation banks to stimulate economic growth and stability. Keywords: Participation banking, financial system, interest rate, Islam