The market share of participation banks in Turkey has increased since the 2001 crisis. Ali Ceylan and Burak Gencoglu delve into the banking laws in the country and discuss how it may affect the Islamic finance industry.

Islamic finance is a relatively new and developing sector for the Turkish economy. The country got acquainted with the Islamic banking model while it was shifting its closed economy to a liberal and open economy in 1980s. During those years, Turkey was trying to enrich its economic system in terms of financial instruments and institutions. Hence participation banks (formerly known as private finance houses) were included into the Turkish financial system as a result of these efforts.

Islamic finance in Turkey was introduced to attract people who are not willing to engage in the conventional banking system due to their religious beliefs. From a broader perspective, another purpose was to attract foreign capital particularly from the Gulf by establishing these Shariah compliant financial institutions.

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