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Diversification of Islamic Financial Insturments
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Table 50:
Selected Financial Indicators: Deposit Banks (Conventional) and Participation Banks
Capital Adequacy Ratio
Return on Assets
Return on Equity
Year
Sector
Deposit
Participation
Sector
Deposit
Participation
Sector
Deposit
Participation
Banks
Banks
Banks
Banks
Banks
Banks
2003
25.1
22.9
N/A
16.4
14.4
N/A
135.6
129
N/A
2004
30.9
28.2
N/A
2.5
2.4
N/A
18.1
19
N/A
2005
28.2
26.2
12
2.4
2.3
N/A
15.8
16.9
N/A
2006
23.7
21.6
12.5
1.7
1.5
3.5
12.1
11.8
36.9
2007
21.9
19.9
16.5
2.6
2.5
3.3
21
22.2
30.8
2008
18.9
17.4
16.1
2.8
2.7
3.1
24.8
26.6
30.7
2009
18
16.5
15.2
2
1.9
2.8
18.7
19.9
24.1
2010
20.6
19.3
15.3
2.6
2.6
2.4
22.9
25.2
19
2011
19
17.7
15.1
2.5
2.5
2
20.1
22.2
16.9
2012
16.6
15.5
14
1.7
1.7
1.6
15.5
16.8
14.8
2013
17.9
17.2
13.9
1.8
1.8
1.5
15.7
16.8
14.7
2014
15.3
14.6
14
1.6
1.6
1.3
14.2
15.1
13.8
Source: BRSA, Sakarya (2016)
A comparison of return on assets (ROA) and return on equity (ROE) reveals that the ROA and
ROE were 1.3% and 13.8% respectively for the depository banks, while they were 1.6% and
15.1% for the PBs in the year 2014. It is noticeable that the profitability ratios were
consistently higher of the PBs during 2006-2009. However, since 2009 and onward there has
been overall decline in these ratios due to overall global and domestic macroeconomic
conditions. The low economic growth of the real sector in recent years explains low
profitability of PBs as the bulk of short-term financing of PBs are linked to the activities in the
real sector of the economy.
Summary of Islamic Banking in Turkey
The growth of Islamic Banking in Turkey has shown notable increase over the past 10
years. The banks were able to double their market share to over 5% in 2015 from
2.5% in 2005.
The total assets of PBs reached US$42.2 billion by the end of 2015, which is five-fold
increase compared to its assets in 2005.
The dominant modes of financing are ‘Murabahah’ and ‘Ijarah’. Murabahah mode of
financing constitutes around 90%, while Ijarah (Leasing) mode of financing is 5%.
One of the major reasons for using ‘Murabahah’ is its short-term investment
mechanism. The overall market conditions in Turkey, where over 70% of funds
collected by PBs have three months maturity period (Taner, 2011) limits these banks
to resort to short-term investment financing modes.
Mark-up in ‘Murabahah’ also allows PBs to earn comparable returns with the interest
returns of the conventional banks.