Analysis of participation banks in terms of liquidity and profitability in periods of national crisis: Comparative analysis of 2010-2017 period

Participation banks serve as bridges whose function is to attract idle funds of societies refraining from interest banking due to their principles into the economy and to attract foreign capital into the country. Within their 35 years of existence in Turkey, these banks have increasingly developed their economic situation and increased their share in the banking sector. Government support for participation banking has also been instrumental in the widespread recognition and trust for such banks in Turkey. The economical effects of political and socioeconomic events occurring in Turkey between 2010 and 2017 such as the Gezi Park Protests, 17-25 December Corruption Investigations, and 15 July Coup Attempt have remained to date. At times of financial and political crises, deposit banks have made greater losses before taxes compared to participation banks. The imbalances in interest rates as well as fluctuations in foreign currency rates have influenced deposit banks and national economy negatively. Participation banks have been relatively less affected by these setbacks, maintaining their growth in terms of equity, assets, profitability, and branching. The present study aimed to investigate the contribution of participation banks to Turkish economy within the context of the historical development of participation banking in Turkey and the world, and to analyze, examine, and evaluate through descriptive research methodology the number of branches and personnel of participation banks, their asset growth ratios, the structure of funds collected and made available, equity, and net profit. In other words, it was aimed to investigate times of national economic and political crises in depth and to analyze liquidity and profitability of participation banks expressed through charts which provide yearly and comparative analyses of the years 2010-2017. The study sample also included Bank Asya, which was transferred to Saving Deposit Insurance Fund of Turkey. The liquidity and profitability ratios of this bank were analyzed up to the third quarter of 2015, as specified by the Participation Banks Association of Turkey. Ziraat Participation Bank and Vakıf Participation Bank were included in the study, as of 2015 and 2016, respectively. The findings of the present study revealed that profitability ratios of participation banks were significantly impaired in 2014, which was largely due to the TL 813 million net loss of Bank Asya. At times of crises, on the other hand, participation banks operating according to the profit and loss basis were influenced by the unfavourable conditions in the sector on a limited scale, and maintained their growth. It is foreseen that participation banks will increase their share in the sector in the medium and long term and become more effective.