Participation Banking

What is Participation Banking?

Participation banking is a banking model that conducts banking operations based on the principle of interest-free banking. It engages in fund collection, fund disbursement, and other banking transactions in alignment with the principles and standards established by the Advisory Board of the Participation Banks Association of Türkiye, general decisions, Bank Advisory Committee resolutions, and guidelines. The concept of participation, one of the most basic features of participation banks is that it has an approach based on sharing both during the financing and raising of funds. Participation banks operate to gather funds through designated current and participation accounts and employ the collected funds in accordance with the principles and standards of interest-free banking.

How Does Participation Banking Work?

Within the participation banking system, funds collected from customers are employed through diverse financing methods, and the resulting profit is shared with the owners of the funds.

Participation banks were established to channel idle funds into the economy and to safeguard and utilize the savings of individuals. These banks operate on a system that revolves around the principle of distributing profits to fund owners. They achieve this by utilizing the funds collected from individuals with surplus funds through interest-free financing.

Why Participation Banking ?

Participation banking introduces an interest-free financing model that differs from profit gained through monetary transactions. Instead, it focuses on earning and distributing profits through commercial activities and shared risk, thus contributing to economic development. The generated profit in an economic venture depends on the success of commercial activities, representing a thriving enterprise and additional value for society.

Participation banking ensures a fair distribution of profits and losses arising from financing methods like partnership, proxy, purchase-sale, and leasing. Participants are considered investors rather than lenders, given the prohibition of interest. Both fund users and providers jointly shoulder business risks, aiming to share the resulting profits or losses from trade and production activities.

In addition to standard audits, participation banking undergoes scrutiny for compliance with its principles. Upholding transparency, shareholders receive comprehensive information about all aspects of the interest-free bank's operations. Shareholders or fund owners have access to detailed information regarding the bank's activities, profit and loss sharing methods, balance sheets, and income statements as per the transparency principle.

Participation banking refrains from financing any product or commercial activity that goes against our societal values. It does not provide financial support to initiatives such as interest, gambling, or alcohol, which do not align with religious values. Instead, it prioritizes ventures that uphold human values, are environmentally friendly, and contribute to charitable causes. As a corporate entity, it serves as an example by actively participating in various social responsibility projects that represent the values it stands for.

With a broad array of products and services, participation banking aims to fulfill all the needs and expectations of its customers. It combines special products introduced to the sector with instruments and opportunities that align with the values of participation banking and traditional banking. As it centers around real trade, participation banking avoids involvement in speculative ventures.

It places a strong emphasis on clarity in trade and refrains from participating in commercial activities that entail uncertainty, which could potentially harm social relationships.  All rights and obligations are meticulously detailed in contracts, showcasing a commitment to contractual agreements. These distinctive features instill confidence in customers.

Participation Account

Profit and Loss Participation Accounts represent the outcomes of profit and loss participation resulting from funds deposited in participation banks. These accounts constitute funds for which no predetermined returns are provided to account holders, and the repayment of the principal is not guaranteed. Opened based on the mudarabah (labor-capital partnership) principle, customers depositing funds into these accounts engage in a profit-loss partnership with the Participation bank. They share the obtained profits according to the initially determined profit-sharing ratio.

Private Current Account

Private Current Accounts, a type of account offered by participation banks, consist of funds that can be partially or entirely withdrawn upon request. No returns are paid to account holders. These accounts can be denominated in Turkish lira or foreign currency and can be opened in the name of either individuals or legal entities. Importantly, there are no limits associated with these accounts.


It is a labor-capital partnership, a type of collaboration where one party contributes capital, and the other provides labor to undertake and manage a business, based on the principle of sharing the resulting profits. It is an instrumental partnership utilized by participation banks for fundraising and fund deployment. Among the fundraising instruments employed by participation banks, Mudarabah participation accounts hold the largest share. In the Mudarabah process, the party with surplus funds (the customer) entrusts their surplus funds to Mudarabah pools of the participation bank for a specified period, allowing the bank to invest them. The profit-sharing ratio is predetermined through an agreement between the two parties. The accumulated funds in these pools are directed towards various investments, and the profits generated from these investments are transferred back to the respective pools. The bank then disburses the share of profits to the capital provider based on the agreed-upon profit-sharing ratio. Additionally, Mudarabah is used as a financing instrument on the fund deployment side

Investment Agency

Investment agency transactions are conducted based on agency principles. It involves authorizing an individual or legal entity, whether for a fee or free of charge, to manage one's capital on their behalf. In this process, the party providing the capital is referred to as the principal, and the authorized party is called the agent, empowered to manage the capital for investment purposes. The agent utilizes the funds in financing specific projects, transferring the resulting profits and losses back to the capital provider. There is no guaranteed return in the investment agency utilized by participation banks for liquidity management, and agreements are reached based on estimated returns for the transactions. It serves as a method of fundraising in participation banks.

Benevolent Loan (Qard al-hasan)

It denotes a form of consumption lending, where money or an equivalent commodity is lent without requiring any surplus. This practice is employed in participation banking within private current accounts, benevolent loan credits, and benevolent loans associated with credit cards.


This is a sales arrangement with a stated profit. In modern participation banking practices, it involves the acquisition of a commodity by the participation bank from the primary seller, usually in cash and subsequently selling it to the customer with a specific profit added, often on a deferred basis, based on the customer's instructions and purchase commitment. This transaction or the final sale contract within this set is also known as financial buying and selling, representing a significant method of fund deployment in participation banking.

Ijarah, Leasing

It is a contractual arrangement that facilitates the transfer of the benefits of an asset (rights of use and enjoyment) to the party committing to pay the lease fee for a specified period. In the context of participation banking, Ijarah finds application in various products and services such as leasing, sub-leasing, service financing, safe deposit leasing, and lease-based banking services (including money transfers, collections, invoice, and tax payments).

Financial Leasing, Leasing

This process involves transferring the benefits of a non-consumable asset to the customer for a specific duration to fulfill the purpose of providing financing. The three key entities in this arrangement are the investor (customer), the participation bank, and the manufacturer. The investor chooses the desired goods and enters into a financial leasing agreement with the participation bank for their acquisition. The participation bank acquires the goods and delivers them to the investor. The investor makes lease payments to the bank at predetermined intervals. Upon completion of the payments, ownership of the asset, from which the investor derives benefits, is transferred to the investor for a nominal amount or at no cost within the agreed-upon period outlined in the financial leasing agreement.

Selem Financing

The term "selem" refers to the pre-sale of a standard commodity (such as grains, legumes, cement, etc.) by an entity or individual in need of cash, with delivery scheduled for a future date. Although not widely used in participation banking products, selem can be a method particularly applicable in financing agricultural products.

Istisna (Contract of Work)

Istisna, also known as a contract of work, refers to contracts designed to have a specified work manufactured for a predetermined fee. The istisna contract focuses on products requiring production or manufacturing. These contracts necessitate determining the specifications, quantity, work, and payment term for the manufactured product. Participation banks can leverage istisna contracts in completing unfinished cooperatives, financing mass housing projects, construction projects, and financing large structures like vehicles, ships, and aircraft.

Sarf Contract (Currency Exchange)

Transactions involving foreign exchange trading are categorized as sarf contracts within the framework of participation banks.  In accordance with this, the exchange of real or symbolic currencies, either amongst themselves or with other currencies, is executed subject to specific conditions. Participation banks facilitate cash transactions for customers intending to buy or sell currencies. Such cash-based foreign exchange transactions are denoted as spot foreign exchange transactions, wherein both amounts are reciprocally delivered at the time of the contract. Additionally, participation banks offer the option to establish precious metal accounts. Through these accounts, investors can engage in precious metal investments, with gold and silver commonly available as investment choices. In precious metal accounts where legal delivery occurs, physical delivery may also be arranged under specified conditions. These accounts can function as either special current accounts or participation accounts.


Guarantee, in the context of fulfilling a debt, involves a third party pledging to the creditor by assuming responsibility alongside the primary debtor. The cornerstone of various guarantees in participation banking, including surety bonds, acceptance, aval, and letters of credit.


Sukuk is a form of financial certificate, categorized as an investment certificate. Issued to finance diverse assets and/or rights, it grants holders proportional ownership in the generated revenues from these assets and/or rights. Based on the underlying agreement, sukuk is classified into types such as lease sukuk, mudarabah sukuk, musharakah sukuk, hybrid sukuk, etc. Due to its capacity to provide consistent rental income and the option for secondary market resale, lease certificates (lease sukuk) are more commonly favored. While the term "sukuk" in Turkey is often synonymous with "lease certificates" due to their initial preference in the country's early sukuk issuances, sukuk fundamentally represents only those formed through lease agreements

Participation Insurance (Takaful)

Takaful, recognized as participation insurance, is an interest-free insurance system fostering mutual support and cooperation among participants against potential risks. In this system, participants contribute premiums that, on one hand, resemble donations and, on the other hand, represent shared capital in the organizer company's management. Essentially, it involves a risk fund formed by participants' contributions to ensure the fulfillment of compensation and/or accumulation payment claims for themselves and other participants. This fund is managed in accordance with participation finance principles by an insurance company authorized for insurance activities, representing a type of insurance grounded in joint risk-sharing and solidarity principles.

Investment Fund

An investment fund is a collective pool of money or assets, encompassing securities, valuable metals like gold, gathered from individual or institutional investors in return for participation shares. Operating on the trust ownership principle, the fund is managed as a portfolio containing various capital market instruments such as stocks, bonds, lease certificates, private sector debt instruments, repo-reverse repo transactions, and gold. When established and operated in adherence to interest-free finance principles, it is denoted as a "participation investment fund."

Interest-Free Banking Principles and Standards

Our bank operates in alignment with the principles and standards of interest-free banking. For detailed information on the principles and standards established by the Advisory Board of the Participation Banks Association of Türkiye (PBAT), along with general decisions and guidelines, please click here.

Annual Activities of Our Bank's Consultative Committee and Evaluation of Compliance with Interest-Free Banking Principles and Standards

Details about the Consultative Committee's annual activities and assessments regarding the bank's adherence to interest-free banking principles and standards are presented in our bank's annual activity report. Throughout the year, the Consultative Committee scrutinizes topics discussed in its meetings, evaluates them in terms of interest-free banking principles and standards, and undertakes necessary efforts to make decisions and provide insights, ensuring our bank's operations are in accordance with interest-free banking principles and standards.

Assets, Liabilities, Revenues, and Expenses Not in Compliance with Interest-Free Banking Principles and Standards

Our bank executes transactions related to assets, liabilities, revenues, and expenses that do not align with interest-free banking principles and standards. These transactions adhere to the principles and standards established by the Advisory Board of the Participation Banks Association of Türkiye (PBAT), along with general decisions and guidelines of a general nature. For detailed information about the principles and standards set by the Advisory Board, as well as the general decisions and guidelines, please click here.