Analysis of the practice of selling non-performing loans to asset management companies in participation banking and a proposal for a new system

The aim of this study is to propose an alternative structure that operates in accordance with participation banking principles to replace asset management companies with which participation banks are required to cooperate in the process of resolving non-performing loans due to legal obligations. To this aim, participation banking and the issue of loans in participation banking are first addressed within a theoretical framework. Then, the working methods of asset management companies, which play a key role in the resolution of non-performing loans in our country's banking system, have been examined, and the methods of resolving non-performing loans in Iran, Pakistan, Egypt, Indonesia, and Malaysia have been presented. The final section of the study includes field work conducted to obtain primary data from all parties involved in the non-performing loan processes of participation banks. In this qualitative study, phenomenological approach was chosen as the research design, in which participants describe events in their own words. In the field research section, semi-structured interviews were conducted with 20 personnel working in the non-performing loan units of participation banks, 5 lawyers involved in the non-performing loan processes of participation banks as external stakeholders, and 10 participation bank customers whose loans had been sold to asset management companies after becoming non-performing. The data obtained from the interviews were analyzed, and based on this analysis, an alternative structure was proposed that could be incorporated in to the problem loan resolution processes of participation banks. In determining the working methods of this alternative structure, the opinion of the Advisory Board of the Turkish Participation Banks Association on the subject was taken as a basis, and an alternative structure capable of operating in three different partnership structures was proposed.