Business model of Islamic banks in Turkey

Abstract

Purpose -The purpose of this paper is inductively identifying the business model of Islamic (participation) banks in Turkey via using bank characteristics, meaning balance sheet ratios.Design/methodology/approach -The methodology starts from bank characteristics and ends with identification of bank business model according to these characteristics under the assumption that there is one single business model (say Model A) for all Turkish Islamic banks. What the author aims to find is the properties of this business model. Regarding the method, seven bank characteristics from liability side and five characteristics from asset side of bank balance sheets were established. While representing these characteristics, the author uses charts and tables. Necessary data are gathered from the Central Bank of Turkey. Time frame of monthly data is from December 2005 to March 2015. In total, there are 1356 observations.Findings -Value proposition of business model of Turkish Islamic banks depends on participation in collecting funds. In terms of customer segmentation, there is dominance of private sector. While using the funds, the main preference is loans, meaning that value proposition depends on loan products, especially murabahah. Thus, revenue streams depend on mark-up. Overall, business model of Turkish Islamic banks seems similar to traditional banking based on intermediation with some peculiarities. There are also some evidences which can be interpreted as signs toward decline in this traditional role like decrease in deposits, increase in funds from financial institutions and decrease in loans.Practical implications -It can be said that original idea of participation banks has been followed on the liability side of Turkish Islamic banks. However, decrease in deposits recently needs detailed investigation to create convenient policies especially by Islamic banks. Similar investigation and policy creation is needed also for the developments of increase in funds from financial institutions and decrease in loans. Furthermore, as the original idea of participation is not followed by business model of Turkish Islamic banks, rethinking and acting is needed in that regard.Originality/value -Main contributions of this paper are as follows: first, it fills a gap in the field where studies regarding business model of Islamic banks are scarce. Second, it fills a gap in literature of Islamic banking in Turkey where most of the studies are about development or jurisprudence of Islamic banks. Third, it provides a decade-long evidence regarding business model of Islamic banks in Turkey. Fourth, the findings provide an initial step for the construction of a business model canvas for Turkish Islamic banks. Fifth, discussion of findings leads to number of important questions which can pave the way for new research studies.

Participation Banks in Turkey: Issues and Proposes Strategies Based on SWOT Analysis

“…PLS (Profit and Lost sharing) -based financing product should be an advantage in Islamic banking, unfortunately sale-based contract 'murabahah' dominates Islamic banking product. Orhan (2018) asserts that PB's Turkey financing is dominated with murabahah contract. In regard to this, Orhan (2018) attempted to conclude that this practice basically similar to the practice in the traditional bank, where the bank mostly rely on giving the loan.…”

“…Orhan (2018) asserts that PB's Turkey financing is dominated with murabahah contract. In regard to this, Orhan (2018) attempted to conclude that this practice basically similar to the practice in the traditional bank, where the bank mostly rely on giving the loan. While simultaneously, murabahah contract that dominates Islamic banking products do not only occur in Turkey.…”

“…Study by Orhan (2018) attempted to identify the business model of participation banks in Turkey by utilizing balance sheet ratios. This study explains that the value proposition of the participatory bank in Turkey is depending on the collected-fund.…”

Savings Based Interest-Free Financing System Through a Marketing Perspective

“…It is suggested that there are two main reasons for private financial institutions to begin their service activities in Turkey. The first of them is accepted as avoiding interest and the second one as making use of an opportunity for the savings collected by Muslim consumers who do not like to use traditional banking services (Orhan, 2018). It can be said that these two reasona are the effectives reasons for arising and processing of SBIFFSSM marketing.…”

Participation (Islamic) Banking in Turkey: A Bibliometric Analysis and Future Research Agenda

“…Empirical 2 2% (Sayar and Azrak, 2021), (Ustaoğlu, 2018). Islamic Finance 17 20% (Dinc et al, 2021), (Özdemir and Selçuk, 2021), (Kevser and Doğan, 2021), (Tijjani et al, 2020), (Pirgaip and Hepsen, 2018), (Bayram et al, 2018), , (Orhan, 2018), (Saraç and Ülev, 2017), (Aysan et al, 2013), (Macit, 2012a), (Kartal, 2012), (Yaacob Dr et al, 2012), (Ongena and Şendeniz-Yüncü, 2011), (Gökariksel and Secor, 2010), (Adaş, 2009). (Wilson, 1990a).…”