Participation banks, like other commercial banks, do not collect deposits against
interest, but collect their customers' savings through participation funds. Funds
collected through the participation fund, which is an alternative financial income
instrument, have an important place in the development of the finance sector in
Turkey. Funds brought into the financial system by participation banks provide
income to savers and affect income distribution in a regulatory way. At the same time,
it contributes to the growth of the economy by transferring resources to the real sector.
It is important to increase profitability in participation banks, which have different
customer potential and income generation.
This research empirically analyzes the sector-specific internal and external
macroeconomic factors that affect the profitability of participation banks in Turkey. In
the research, panel data analysis was conducted using the quarterly data of 5
participation banks for the period 2016–2021. Two alternative profitability indicators
were used to determine the factors affecting the profitability of participation banks.
These indicators are return on assets and return on equity. These variables were
included as dependent variables in the established models. The independent variables
of the models were categorized as internal and external variables. According to the
analysis results; It has been determined that the significant and positive determinant
of return on assets is Non-Performing Receivables. In the model, in which the return
on equity is used as a measure of profitability, it has been determined that the significant and positive determinants are Funds Collected, Non-Performing
Receivables and Total Assets, and the negative determinant is the Selling Price of
Bullion. Variable results of Funds Used, Number of Personnel and Time Deposit Rate
were found to be meaningless in the models.