I.Participation Banking in The Literature
Banking methods defined in this system called “Islamic Banking” in the international literature are methods such as various kinds of project partnership and others based on prohibition of interest (Moles & Tery, 1999, p. 304). Islamic banks in general referred to the three types of. (1)Development banks, (2) Islamic banks in special purpose, (3) Islamic Commercial Banks. Participation banks may categorized in Islamic Commercial Banks groups (Canbaş & Doğukanlı, 2007, p. 237). Islamic bank works as a trading concern and financial intermediary to perform interest-free activities purely according to principles of Sharia’h. It is a welfare organization that promotes business and trade activities by pooling the financial resources for the sake of profit and loss for mutual benefit (Ahmad, Humayoun, & Hassan, 2010, p. 8).
Participation or Islamic banks are not institutions peculiar to Turkey. All around the world, especially in Muslim countries, there are many financial bodies operating according to a similar system. Even if the system consisting of such kind of institutions operating on the basis of partnership of profit and loss is known as “interest free banking” or “Islamic banking” in the world, it is taken first as “special finance house”, and then as “participation banking” in the Turkish regulations.
The first modern experiment with Islamic banking can be traced to the establishment of the Mit Ghamr Savings Bank in Egypt in 1963. During the past four decades, however, Islamic banking has grown rapidly in terms of size and the number of players. Islamic banking is currently practiced in more than 50 countries worldwide. In Iran, Pakistan, and Sudan, only Islamic banking is allowed. In other countries, such as Bangladesh, Egypt, Indonesia, Jordan and Malaysia, Islamic banking co-exists with conventional banking. Islamic banking, moreover, is not limited to Islamic countries (Chong & Liu, 2009, s. 125-126).
But, when we look at the books of financial institutions generally we can’t see this institutions among the financial institutions (Rose & Marquis, 2009). (Burton, Nasiba, & Brown, 2009) (Mishkin & Eakins, 2009) On the other hand Islamic banks ability to withstand the global downturn has fuelled an expansion of Islamic finance around the world. Islamic banks have learned that customer loyalty and brand loyalty must be earned (Omar & Ali, 2010, p. 25).
The Islamic banking and finance systems in West will continue to grow in areas like Sukuk, Takaful, hedging funds, mutual funds, equity & asset management, corporate finance, wealth and asset management. These high street banks are far more accessible and popular, and all offer similar services. The main reason for the struggle is that, the Islamic bank is introducing an entirely new banking model into a country that has been built around an existing banking system that has been around for a long time (Malik & Malik, 2011, p. 184).
