Participation finance is structured not only to generate financial returns but also to generate social benefits by directly contributing to the real economy. Guided by the principles of directing capital to productive areas, sharing risk, and ensuring the fair functioning of the economic cycle, the system serves both financial stability and social balance.

The institutionalization of participation finance in Türkiye continues to advance, driven by a robust regulatory framework, strong public support, the sector’s growing institutional maturity, and the rapid pace of digitalization. Reflecting these structural improvements, the sector demonstrated solid performance in 2025. As of September 2025, the total assets of participation banks had increased by 45% compared to the end of the previous year, reaching TRY3.86 trillion (US$91.51 billion), with their share in the overall banking sector rising to 8.9%

Review of 2025

The year 2025 has been a period in which the participation finance sector has performed beyond expectations in terms of scale and efficiency. The target of TRY1.77 trillion (US$41.95 billion) in assets set for 2025 under the Türkiye Participation Banking Strategy Document (2015–2025) was exceeded significantly, reaching TRY3.8 trillion (US$90.09 billion) as of September 2025. As of November 2025, the number of participation banks has reached 10, providing services in line with interest-free finance principles. 

According to September 2025 data, participation banks recorded TRY2.51 trillion (US$5.95 billion) in collected funds and TRY1.99 trillion (US$4.72 billion) in disbursed funds. Strong momentum has also been achieved in profitability, with net profit increasing by 32.6% to reach TRY59 billion (US$1.40 billion). The participation finance sector has also made significant progress in SME financing and digital transformation. 

Participation banks, which have extended TRY666 billion (US$15.79 billion) in SME loans, have reached a 12% share in this area within the banking sector as a whole. The share of SMEs in total financing stands at 34%, while in the overall banking system it remains around 25%.  This indicates that the contribution of participation finance to the real economy and production-oriented growth has become stronger.

Digitalization has been among the top strategic priorities of the sector during this period. The customer base has expanded with digital participation banking applications; open banking, AI-supported infrastructures, and data analytics usage have formed the basis of a new approach that personalizes the customer experience. The number of active digital customers increased from 3.2 million in 2020 to 6.2 million by the end of 2024, significantly enhancing the accessibility and reach of participation banking. Around 130 million transactions were conducted through digital channels, driven in part by the launch of two digital participation banks in 2024. Participation banks have enhanced their operational efficiency through AI-based credit assessment systems, digital Sukuk platforms and automated risk monitoring tools. Leveraging digitalization, they have strengthened financial inclusion and expanded access to the financial system for a broader audience. Another important development contributing to the expansion of the participation finance ecosystem is the launch of Adil Katılım Participation Bank, which operates entirely on a digital infrastructure. With this addition, the number of participation banks in Türkiye has reached ten, including three digital participation banks.

This strong growth in the sector has not been limited to financial indicators; it has also brought about structural transformations. The ‘The Communiqué  on the Calculation of Banks' Green Asset Ratio’ published by the BRSA (Banking Regulation and Supervison Agency) has enabled the measurement and reporting of environmental investments, contributing to the strengthening of environmentally conscious financing models in line with ethical finance principles. 

The Turkish Sustainability Reporting Standards (TSRS 1 and TSRS 2), published by the Public Oversight, Accounting and Auditing Standards Authority (KGK), have ushered in a new era in financial reporting. These standards have established principles for the disclosure of environmental, social, and governance (ESG) indicators, strengthening the transparency and sustainability performance of institutions.

Advancements in product diversity, standardization, and governance have been among the defining developments of 2025. In line with the TKBB Strategy Document, significant progress has been made in enhancing service quality and broadening the range of products offered within the sector. In this context, Türk Eximbank has accelerated its efforts to develop interest-free banking products in compliance with BRSA regulations. 

The establishment of the Interest-Free Banking Advisory Committee within the bank, along with the introduction of the Participation-Based Export Receivables Insurance, has provided exporters with a new guarantee mechanism aligned with the principles of interest-free finance. This initiative has contributed to the growth of interest-free export financing by protecting foreign receivables against commercial and political risks.These developments show that by 2025, the participation finance ecosystem has matured not only in terms of size but also in terms of institutional depth and focus on sustainability.

Education, capacity development and international cooperation 

The year 2025 has been a period of financial growth in the participation finance sector, as well as strengthened knowledge sharing, human resource development, and international cooperation. TKBB has pioneered knowledge-based transformation in the sector through its training programs and strategic partnerships.

Cooperation agreements signed with banking associations and regulatory institutions in countries such as the UK, Azerbaijan, Malaysia, Pakistan and Kyrgyzstan have increased knowledge sharing and brought Türkiye's expertise in participation finance to international platforms. Active participation has been ensured in the work of the Council of Bank Associations established within the Turkish states; participation finance, sustainable banking and regulatory framework training programs have been organized for member countries in cooperation with TKBB (Participation Banks Association of Türkiye) and TBB (The Banks Association of Türkiye). 

TKBB has conducted various training and certification programs on participation finance principles, sustainability, digital transformation, treasury, and risk management to develop qualified human resources in the sector. These activities have ensured the institutionalization of a knowledge-based, innovative, and sustainable growth approach that shapes the future of the sector.

Preview of 2026

The participation finance sector is entering 2026 on a balanced, sustainable, and inclusive growth path. The sector's priorities are shaped around digitalization, sustainability, social impact, SME financing, and qualified human resources. Strengthened structures, innovative products, production-oriented financing models, and human-centered approaches throughout 2025 have laid a solid foundation for stable development in 2026. 

Participation banks aim to further deepen financing models that are consistent with environmental and social responsibility principles. Green asset ratio applications increase the measurability of environmentally friendly investments, while the sustainable finance approach directs projects that support the transition to a low-carbon economy.

Digitalization will continue to be decisive in the transformation of the service model. AI-powered processes, the maturation of the open banking ecosystem, and personalized customer experience will be key factors shaping competitiveness in 2026. During this period, Türkiye aims to make participation finance an effective model not only nationally but also regionally. The Istanbul Financial Center (IFC) stands out as a global meeting point at the heart of this vision. Strengthening qualified human resources is critical to the sector's sustainable growth. 

The year 2026 will be a period in which participation finance not only grows but also gains institutional depth, achieves technological maturity, and strengthens its human resource capacity. The sector is progressing towards becoming the architect of an innovative and inclusive financial future without compromising ethical principles.

Conclusion

The participation finance sector has entered a period of maturity, marked by sustainable growth, digital transformation, and institutional resilience. A strong regulatory framework, together with the adoption of ethical and sustainable finance principles and an increasing contribution to the real economy, has further strengthened the sector’s position within Türkiye’s financial system.

Progress achieved in digital banking, green finance, and human capital development has enhanced the sector’s alignment with global trends, while maintaining its core approach based on justice, inclusiveness, and ethical values. These advancements position participation finance not only as a robust model at the national level but also as an innovative and reliable financial model at the regional level.

In the coming period, the sector will continue to deepen its focus on technology-driven growth, environmental responsibility, and social impact, thereby reinforcing Türkiye’s vision of becoming a regional hub in sustainable and value-based finance.

This article was first published in IFN Annual Guide 2026 dated the 24th December 2025.