The purpose of this paper is to attempt to compare the performance of Islamic banks against conventional banks in Turkey. This comparison is much more distinctive and significant in Turkey when compared to other countries, as Turkey stands as a model for the world in interest-free banking system.
The comparative performance analysis was conducted by means of logistic regression method during the period of 2001-2009. The CAMELS approach is utilized to assess the managerial and financial performance of banks.
The results signify that Islamic banks operating in Turkey perform better in profitability and asset management ratios compared to conventional banks but lag in sensitivity to market risk criterion. These findings might mainly be ascribed to the fact that these banks allow lower provisional losses compared to conventional banks and have some tax advantages.
Utilizing a more recent and consistent data set, the analyses could be replicated to determine if the results are subject to any sample bias.
These finding reveal significant implications for potential entrants into Turkish banking sector particularly for foreign investors.
The findings from this study may reinforce the awareness and confidence in participating banks in Turkey.
Turkey is particularly interesting to conduct this analysis because Turkey is a Muslim but secular country and both Islamic and conventional banks are subject to same set of banking regulations which are based on Western traditional banking system. Furthermore, to the knowledge, there is not a comprehensive study that compares the performance of conventional and Islamic banks in a Western banking system.
Erol, C., F. Baklaci, H., Aydoğan, B. and Tunç, G. (2014), "Performance comparison of Islamic (participation) banks and commercial banks in Turkish banking sector", EuroMed Journal of Business, Vol. 9 No. 2, pp. 114-128. https://doi.org/10.1108/EMJB-05-2013-0024Download as .RIS
Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited