Innovations that Participation Banks Brought to Our Country

 The changes occurring in the needs of the individuals who make up the society also take place in the economic field, and the need to reorganize the economy in line with these needs arises. Participation banks are also the product of such a need. These banks were included in the Turkish financial system by the Council of Ministers' decree in 1983, in order to provide diversity and depth to the Turkish financial market dominated by deposit banks and to respond to social needs. Participation banks in our country have made a major leap especially after 2001 and have become competitive with other commercial banks. In this regard, that the participation banks are subject to the Banks Law through the amendment made in 1999 and 2001 and that participation banks gained the same rights and obligations as commercial banks under the legislation have a great impact. Aside from all other economic factors of a country, the depth, diversity, and efficiency of its financial system is a very significant factor for the soundness and growth of that economy. From this point of view, participation banking fulfills very important economic and social duties thanks to the diversity it brings to the Turkish financial sector. Some of these functions are described below.

Leading to a different perspective

The most important innovation brought by participation banks to our country has been to teach thinking in different dimensions in the economic field despite the fact that it is slow and difficult. As the deceased Professor Sabahattin Zaim stated: "Our country's people are almost up to their ears in interest, both in terms of physical, mental, and thinking-related aspects. Everyone has an interest account. People say, 'How much money will I get if I invested in this one, how much money will I earn if I invested in the other' and they make their calculations according to interest." The interest system has permeated every aspect of life, and society has become unable to think of anything different. In such an environment, participation banks provided the world of the economy with the opportunity to discuss and keep the interest-free economy model on the agenda.

Turning money into a factor of production

In participation banking, savings become a factor of production through participation in commercial and industrial activities. In this way, the volume of savings is increased by producing added value. Idle savings outside the economy are a loss both for the country and for their owners. In addition, the idle accumulation of money does not go along with the principles of the interest-free economy model. Savings turned into investments will contribute to the increase in national income, and this increase will contribute to the welfare of society. The use of savings in areas such as bills, bonds, and interest guarantees outside the real economy pushes savers into laziness and deters entrepreneurs from production and working. Especially in times of crisis, even industrial establishments turn to high interest rates and earn a significant part of their income through interest.  An economy that is not built on production is subject to debt and in this case, large masses have to suffer due to poverty while a minority split the wealth among themselves. Particularly, that the state institutions, where waste is common, share the resources in the market with high interest narrows the resource opportunities of the producing and working entrepreneurs. The borrowing needs of the public are, in principle, out of the scope of participation banks.

Weakening the destructive impact of crises

Since participation banks always finance the real economy, production, and trade, they weaken the destructive impact of the crises. They continue to support their customers even in times of crisis. They have no other area to allocate their funds. For this reason, they continue to provide funds to their customers during crisis periods (perhaps these periods are when companies need resources the most).

New opportunities for customers using funds

A new initiative refers to new opportunities for customers using funds. The competition of participation banks with conventional banks also affects the approaches of conventional banks. Most loan customers who prefer to work with a participation bank are provided with offers by conventional banks similar to murabaha loans. Conventional banks are also affected by participation banks in terms of price, lending process, and suretyship conditions. This means getting services of higher quality for customers using funds. Participation banks are also good profit-loss partners for entrepreneurs who do not invest because they are afraid of interest rate uncertainty and high interest costs.

Equal opportunity for customers depositing funds

Among the factors that enable human beings to respect themselves, the most significant one observing the values they believe in their daily lives and behaving in line with their beliefs. Participation banking is an equal opportunity for individuals who do not deposit their savings to conventional banks in line with the order of Islam that interest is forbidden. Hence, it is possible for the individual in the social structure to protect and increase the value of their savings.

Funding from Gulf Countries

Even though it has not reached a sufficient volume yet, funds are transferred from the Gulf countries to our country through participation banks. This practice is an important opportunity for our country that has always had a resource deficit and over time, fund imports will increase in volume. Participation banks have significant potential and opportunity to attract surplus funds from oil-rich Gulf countries to our country. There is an important potential for these countries, which want to utilize their funds in line with interest-free principles, to use participation banks as an intermediary or as a shareholder for their murabahah or profit and loss investments in our country.

Contribution to the process of formalizing the economy

In line with the fund allocation principles of participation banks, it is necessary to buy and sell a commodity or service in order to be able to allocate funds, unlike conventional banks. As per the legislation, these institutions are obliged to keep a copy of the invoice of the commodities or services subject to purchase in the customer files. As is seen, transactions financed by participation banks must be recorded in the accounting records without exceptions. In this respect, interest-free banking is an important working system that supports the government's fight against informality.

Overlooking the nominal speculative transactions

The philosophy of promoting production and trade, and the balanced sharing of wealth manifests itself in participation banking in the form of sharing a common fate with its customers, who carry out trade and take risks, under all conditions. In this respect, participation banking directs the attention of the society from individual and speculative fields to production and the search for social benefit.

Providing the country with a skilled workforce

Participation banks have been training their own personnel since their establishment.

Providing financial product diversity

In our country, as in other developing countries, financial applications, resources, and financial product diversity are quite limited. The inadequacy of capital markets and savings is one of the factors that complicate the development of our country. Participation banking is an important institution that contributes to economic diversity and wealth through different methods and principles.

Zeynep Aslı Kekeç