The development of participation banking in Turkey and its comparison with conventional banking based on selected indicators

In accordance with the proclamation of the Republic, it is observed that conventional banks operate in the Turkish banking sector. However, in the 1980s, with the increase in liberalization movements in the economy, it was seen that the Islamic banking understanding began to enter the financial system. Albaraka Türk and Faisal Finans institutions were the Private Finance Institutions, which were first established in 1985 with the principle of interest-free. However, since these institutions, which do not resemble a bank in name, face different problems in terms of reliability, recognizability and transactionability in both national and international financial markets, the relevant banks were named "Participation Banks" with the Banking Law enacted in 2005. As of April 2023, there are six Participation banks in total in the Participation banking system. Three of these banks were established with private capital and the other three were established with public capital. Participation banks with private capital are Albaraka Türk, Türkiye Finans and Kuveyt Türk Banks. Participation banks with public capital are Ziraat Participation, Vakıf Katılım and Türkiye Real Estate Banks. As of 2022, sector share of total assets of Participation Banking within the Turkish Banking sector is 8.3%. As of March 2023, the capital adequacy ratio of the Participation banking system is 18.17%, while the capital adequacy ratio of the Conventional banking system is 17.67%. While the ratio of non-performing loans to total cash loans in the participation banking sector is 1.22%, it is 1.82% in the conventional banking sector. In terms of net general position in foreign currency, the Participation Banking system is in a long position and its value is 954.50. The conventional banking system, on the other hand, serves in a long position and has a value of 5,849.76. In this study, the development of the Participation banking system in Turkey and the Participation banks and Conventional banks in the Turkish banking system; In terms of capital adequacy ratio, the ratio of NPLs to total cash loans and foreign currency net general position are compared.