COMPARISON OF FINANCIAL PERFORMANCE OF PARTICIPATION BANKS AND DEPOSIT BANKS

Authors

  • Merve TUNCAY Cumhuriyet Üniversitesi

Keywords:

Participation Banking, Deposit Banking, Independent Samples t-test, Mann Whitney-U Test

Abstract

Along with the Banking Law regulations No. 5411, banks operating under the interest-free banking system in Turkey have been just like the deposit banks and these institutions have continued to operate as “participation banks”. This development has taken an important step towards increasing the competitiveness of interest-free banks having the aim of offering an alternative banking system. Moreover, the inclusion of the Vakıf Participation Bank and Ziraat Participation Bank in the system enabled that participation banking services are handled by the government and helped participation banking develop further. The purpose of this study is to statistically compare the financial performance of commercial banks and participation banks operating in Turkey in 2016 by various indicators. The financial ratios regarding capital structure, profitability and asset quality that are obtained from the annual financial statement data of 22 banks are analyzed by the independent samples t-test and Mann-Whitney U test. As a result, despite being statistically insignificant, deposit banks are found to have higher level of profitability, asset quality and equity ratios while participation banks perform better in terms of leverage and asset growth ratios. In addition, asset size is statistically significant and higher in deposit banks. It is an interesting finding that despite their low level of profitability, assets of participation banks grow faster than the deposit banks similar to the other examples worldwide. It can be said that the findings of the study overlap with the aim of participation banks namely transferring funds collected to the units needed under the interest-free finance principles and sharing losses besides profits to the contrary of deposit banks which are aiming to maximize profit.

Published

2024-01-16

How to Cite

TUNCAY, M. (2024). COMPARISON OF FINANCIAL PERFORMANCE OF PARTICIPATION BANKS AND DEPOSIT BANKS. Al Farabi Uluslararası Sosyal Bilimler Dergisi, 2(1), 160–176. Retrieved from https://alfarabijournal.com/index.php/pub/article/view/57

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Articles

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