Contribution to the financial depth of participation banking in Turkey

In developing markets, the functionality of the financial system is important. The financial system acts as an intermediary in transferring the inactive funds held by economic agents to the real sector. The concept of financial depth refers to the proliferation of channels that turn savings into investment in the financial innovation process in the economy. Financial deepening increases the number of financial services and institutions per capita, thus enabling more people to be involved in the financial system and higher volume transactions. Financial deepening also positively affects the transfer of funds to the real sector. The aim of this study is to determine the effects of participation banks on financial deepening. The data set used in the study was obtained from the TCMB and TK databases. Unit root test, Johansen cointegration test and Granger causality test were used to evaluate the data. It was determined that the main activities in the participation banks (credit and deposit transactions) had an impact on the financial depth in the long term but not in the short term. This indicates the participation of financial and banking activities in Turkey that it is the impact on the real sector.