Performance of Participation Banks in Türkiye

Abstract

Interest-free banking has been steadily gaining a larger share worldwide, introducing alternative financial products to individuals and businesses. However, since all financial intermediaries operate within the same economic system and the core function of intermediation inherently involves earning profits from borrowing and lending activities, it is not possible to consider interest-free banking as entirely separate from conventional banking. In practice, the differences in terminology and theoretical foundations among banking groups often converge significantly. This study presents the performance of participation banks—the practitioners of interest-free banking in Türkiye—over the past 10 years (December 2014–December 2024). Evaluated alongside the development of deposit banks, the performance results of participation banks highlight their expanding role in the sector. While participation banks have outperformed conventional (deposit) banks in terms of balance sheet growth, their financial results and profitability trends have varied across different years.