Participation Banking

Participation banking refers to interest-free Islamic banking. That term is only used in Türkiye due to its distinctive history and socioeconomic and political background. However, the general idea and functioning are the same between Islamic and participation banking. The main aim of participation banking is to conduct its activities in line with Islamic rules and ethos. In that regard, noninterest-based instruments are used on the liability and asset sides. The direct history of participation banking in the world is relatively new. The Mit Ghamr Savings Bank, established in 1963 in Egypt, is widely recognized as the first example. The first examples in Türkiye appeared in the 1980s. Participation banks have increased in number since the 1960s. The places where it exists are also diversified. Currently, participation banks exist even in areas where Muslims are a minority, such as Germany or Canada. The instruments used by participation banks were also diversified. All these developments are not free from criticism, though. Türkiye, a candidate for becoming a hub for Islamic finance, exemplifies a case where one can observe all these developments regarding participation banking.