Ihlas Finance House (Bankruptcy)

This entry examines the trajectory of the closure of one of the leading Islamic financial institutions in Turkey, Ihlas Finance House, and the root causes of its collapse. The Ihlas Finance House, established with the hope of providing alternative financial options for the pious investors, turned to be a huge failure due to mismanagement and lack of strong institutional control. The lessons learned from this experience, however, led to the introduction of strong measures in the banking system which also included Islamic participation banks and institutions. In consideration of the financial bankruptcy of the Ihlas Finance House, the system adjusted itself to avoid similar repercussions which would otherwise discourage the depositors from preferring participation banks in Turkey.