International Conference on Economic and Social Studies, 10-11 May, 2013, International Burch University, Sarajevo

International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo

A Different Banking Methods and the Developing in the Turkish Finance Market-Turkish Participation Banking for 2007-2012
Ferhat Sayım

Yalova University, Yalova, Turkey

[e-mail]

Abstract
Financial systems and institutions has become the most important reason in the fragility of world economic system. The formation and development process of the financial structure also constitutes the infrastructure of the world economic system. The course of the financial system and development has led to debate with the financial crisis in 2008-2011. One of the discussion topics in order to eliminate problems caused by the conventional banking system is alternative financing systems. In Turkey, the corporations based on profit share system which are named participation based banking spotlight, if the alternative banking systems are considered. These banks which determine different principles in the risk distribution of the portfolio acquired are analyzed more nowadays. Participation based banks are placed in almost every regulation related to banking terms and get their legal infrastructure more stable in the banking legislation of Turkey.
This study is a 2007-2012 part of research series. We try to find out the place and the importance of participation based banking with the various sub-headings especially in Turkey. We examine the comparative review 2007-2012 data of participation banks which Collected Turkish Currency and Foreign Currency Funds, Bank Loan Funds, Total Assets, Equity and Net Profit figures for the four participation banks in Turkey. We are comparing the total figures with deposit banks for the same period.
One of our primary goals in this essay, to study in the framework of the alternatives of the financial institutions and options. These options could be asserted as a vibrant and viable well established choice as a non-western model- different from the classical western interest based dominant banking system in the globe. Moreover, that participation banking systems’ grow and increase with its resourceful bulk of transactions and shares within the financial market. In addition, we intended to delineate the basic functioning structures, rules, norms, principles, procedures, operations of that alternate banking system in the financial market.
After that, we have applied as a descriptive, explanatory, discursive and comparative analytic methodology to expound the matter in detail. Having gathered literature reviews then we have concentrated on Turkey as a model state in that banking system practice; at which, what kind of instruments and tools used by referring basic indicators, data and information related to the growth, flourish and share of that sector within the total banking and financial system in Turkey.
Furthermore, that participation banking system positions, researched in the country. Thus, it is explicated more concerns on by investigating its credits, deposits, financing formulation systems and commitments with the banks, customers and investors of the alternate banking system in the country’s financial order. At last, we have attempted to clarify and summarize the concepts, definitions, expositions, demonstrations, rules, assets, liabilities, equities etc.. by giving special cultural internalizations about the organizational and operational activities of the participation banks both similarities and discrepancies, too; so as to draw the attentions of the new researchers and studies in that situation.
Keywords: Bank, Finance Market, Finance Sector, Participation Bank, Islamic Bank, Interest Free Banking, Alternative Banking System

Introduction
With their former name Private Finance Institutions, or with the new one, Participation Banks have no authority to collect deposits but receive fund through special current accounts or profit and loss participation accounts, and utilize fund through methods such as production support, community of profit and loss, financial leasing, buying and selling documents against payment. Even if these institutions are having been allowed in Turkey since 1984, they have been limited in terms of both quantity and scale (Central Bank of Republic of Turkey, 2005).
The constitution of the legal base for interest free banking in our country is dated as the end of the year 1983. With the decree dated 16.12.1983 and numbered 83/7506, the foundation of Private Finance Institutions is laid.

Participation Banks are banks operating in financial sector, financing real economy and offering banking service. Participation banks collect funds from saving owners, use them in industrial and trade sectors according to the interest free financing principles and shares the profit or loss with saving owners. The word “participation” in their name expresses that this type of banking is based on the principle of participation to profit and loss (The Participation Banks Association of Turkey-FAQ, 2010).

Participation banks serve as a means of transformation of saving to capital. Proportional to their advantage of working with a greater number of branches, they also give standard banking services such as investment consulting, safe deposit box, money transfer service, giving check book, mediating cash proceeds etc (Battal, 2007, p. 57). Today, variety of such services given by participation banks is equal or similar to the standards of other banks.

Now, in this article, we are going to elaborate as the unit of analysis, the Participation Banks, new financial instruments. In the middle of the first quarter of 21th century, there has been occurred a World Financial Crises. In fact, that crises mainly influenced the capitals of the financial center in the West. For those countries which heavily affected by this financial crises, forced them look for new financial instruments and systems. For that reason, it leaded to the quest for alternative models, opportunities or proposals.

The fiscal and financial crises, especially in the European Union Member States, it may be due to of the rigidity of Maastricht Euro criteria, is deepening and deteriorates further. So we think that it proves the need for searching new sort of financial innovations, techniques and tools. It is also our modest propositions that might be recorded some theoretical and practical contributions and amendments to overcome these current troublesome critical financial problematic.

One of our primary goals in this essay, to study in the framework of the alternatives of the financial institutions and options. These options could be asserted as a vibrant and viable well established choice as a non-western model- different from the classical western interest based dominant banking system in the globe. Moreover, that participation banking systems’ growth, advancement and increase with its resourceful bulk of transactions and shares within the financial market. In addition, we intended to delineate the basic functioning structures, rules, norms, principles, procedures, operations of the Alternate banking system in the financial market.

After that, we have applied as a descriptive, explanatory, discursive and comparative analytic methodology to expound the matter in detail. Having gathered literature reviews then we have concentrated on Turkey as a model state in that banking system practice; at which, what kind of instruments and tools used by referring basic indicators, data and information related to the growth, flourish and share of that sector within the total banking and financial system in Turkey.
Furthermore, that participation banking system positions has been researched in the country. Thus, it has been explicated more concerns on how it can be investigated by mentioning its credits, deposits, financing formulation systems and commitments with the banks, customers and investors of the alternate banking system in the country’s financial order. At last, we have attempted to clarify and summarize the concepts, definitions, expositions, demonstrations, rules, assets, liabilities, equities etc.. by giving special cultural internalizations about the organizational and operational activities of the participation banks both similarities and discrepancies, too; so as to draw the attentions of the new researchers and studies in that situation.

1.