A recent news story in the financial press brought the structural problems in the participation banking sector back onto the agenda. A paradox emerged when an institution with the term “participation bank” in its name was unable to be included in Borsa Istanbul’s “participation index” during its initial public offering process. Yusuf Dinç expressed this paradox in his Yeni Şafak column dated December 23, 2025, as follows: “It is thought that the ownership structure of the bank constitutes an obstacle to inclusion in the participation index in such a public offering.”
A financial institution, despite having “participation bank” in its name, cannot meet the criteria for the “participation index.” Is this merely a technical inconsistency, or does it raise deeper questions about the fundamental structure of the sector?
Contradictions in Ownership Structures
A notable issue regarding the sector concerns the ownership structures of some participation banks. In the past, it was a well-known fact that the main shareholder of a participation bank in our country was a conventional bank. An institution operating with an interest-based business model was the principal shareholder of an institution claiming to practice Islamic finance. This situation, which is problematic in terms of logical consistency, was not sufficiently discussed.
The fact that participation banks, which strengthen their legitimacy grounds with the argument that working with conventional banks is not permissible, are in collaboration with conventional banks is a striking contradiction. This double standard issue is an important matter that requires consideration.
Operational Challenges
Between 2020 and 2025, some participation banks undertook salary payment operations for public institutions. Thousands of public employees were directed to these banks on the grounds of religious sensitivities. Islamic values envision facilitating people’s affairs and treating them well. Institutions providing services based on religious sensitivities have a responsibility to ensure high-quality service standards. When it comes to institutions bearing Islamic identity, deficiencies cease to be merely commercial problems and bring with them the debate about the instrumentalization of religious values.
The Problem of Internalization
Yusuf Dinç’s observation is an important indication that some actors in the sector have not entered participation banking with full internalization. Some banks appear to have evaluated participation banking as a market opportunity.
This situation manifests itself through terminological changes:
- Late interest → Late penalty
- Interest-bearing deposit → Profit-guaranteed participation account
- Interest-bearing loan → Profit-sharing financing
The critical question: Do changes in nomenclature also change the nature of the transactions? In the jurisprudential tradition, the principle that rulings should be determined according to substance, not names, is an important principle.
The Paradox of a Participation Bank Unable to Join the Participation Index
A financial institution, despite carrying the identity of a participation bank, cannot be included in Borsa Istanbul’s participation index. The Borsa Istanbul participation index is a mechanism that monitors compliance with Islamic principles. How should the fact that an institution operates as a participation bank but cannot meet the criteria of this index be evaluated?
Making changes on paper in the ownership structure as a method of resolving this paradox is an attempt to achieve formal compliance rather than bringing a solution to the essence of the problem. After these developments, the sector needs to switch to alarm mode and develop an autoimmune system.
The Use of Religious Sensitivities for Commercial Purposes
Within the modern financial system, there are significant challenges in establishing a banking system that is fully compliant with Islamic principles. However, what is critical is the attitude and communication strategy displayed toward this challenge. Two approaches are possible:
- Honest/Transparent approach: We are trying to offer a model as close as possible to Islamic principles within the existing system, but we acknowledge the difficulties of full compliance.
- Idealized approach: Our system is completely Islamic and halal, other banks are completely un-Islamic and haram.
“If working with any bank is a necessity in our time, admitting openly that we work with that bank based on this justification is more honest than engaging in deceitful practices and presenting black as white.” This approach offers an important perspective in terms of intellectual honesty and transparency. Presenting reality differently from what it is may provide short-term commercial gain, but in the long term, it causes damage to society’s trust in both religion and these values.
The Principle of Jurisprudential Consistency
Another fundamental principle in jurisprudential methodology is that transactions with the same characteristics should be subject to the same ruling. Accordingly:
- If a transaction is permissible at a participation bank, it should also be permissible at a conventional bank.
- If a transaction is not permissible at a conventional bank, it should not be permissible at a participation bank either.
Priority: The Benefit of Society
Protecting the Muslim community and protecting participation banks are different things. Protecting the Muslim community requires that citizens’ religious sensitivities not be instrumentalized, that they receive quality service, and that they be informed transparently. The priority should be the benefit of society, not the interests of institutions.
The Question of Reputation
The most critical point in this debate is the reputation of Islamic values in the eyes of society. Deficiencies encountered while receiving service from an institution bearing Islamic identity create a negative impression not only about that institution but also about Islamic values. Society, especially the younger generations, sees this inconsistency and questions the difference between Islamic values and practices, and even the practitioners. The instrumentalization of religious sensitivities harms the social reputation of religion.
Solution Proposals
To participation banking actors:
- Terminological Honesty: If our institutions do not operate in full compliance with Islamic principles, realistic descriptions such as “aiming to approach Islamic principles” can be used.
- Transparent Communication: It is important to transparently explain to the public the relationships with conventional banks or the challenges in practices.
- Service Quality: The high moral standards required by Islamic identity must be demonstrated in service quality.
To the scholarly/academic community:
- Jurisprudential Consistency: If the transactions performed are essentially the same as those of other banks, issuing different rulings should be avoided.
- Independent Auditing: It is important that participation banks’ compliance with Islamic principles be monitored by independent advisory boards and shared transparently.
- Scholarly Accumulation: Training experts who are competent to supervise the sector, knowledgeable in both conventional banking and the 15-century jurisprudential accumulation of the Islamic world, is indispensable.
The Responsibility of Protecting Islamic Values
Protecting the Muslim image and combating the exploitation of religion is the duty of every Muslim. This points to a collective responsibility. Protecting the social reputation of Islamic values is not only the duty of religious authorities but of every conscious citizen. It should not be forgotten that protecting the social reputation of religious values is the most fundamental responsibility of those who uphold these values.
