The Effects of Global Economic Crises on Performance of Participation Banks: The Case of The Covid-19 Outbreak

Delice G.

ERCIYES UNIVERSITY JOURNAL OF FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES, cilt.62, ss.87-119, 2022 (Hakemli Dergi)

Özet

The efficiency of Islamic banking practices operating under the name of Participation Banks in Turkey and their share in the financial system have gradually increased, and thanks to the products offered by these banks, significant progress has been made in bringing savings into the financial system, in obtaining resources from abroad as well as from within the country, and in the diversification of resources. Determining the impact level of global crises to the Islamic banking system, which is built on interest-free transactions, will enable the efficiency of the system to be determined and the necessary improvements to be made for the faulty aspects. In this context, in our study, the developments in the performance of participation banks operating in Turkey in the face of global economic/financial problems caused by the 2008 global financial crisis and the Covid-19 pandemic are discussed in comparison with deposit banks. By using the Gregory-Hansen cointegration test, which considers the structural breaks in the system, the effects of the ratio of operating expenses to assets, financing-deposit (participation fund) ratio, non-performing financing ratio, and capital adequacy ratio indicators on the return on assets were analyzed. According to the findings, there was a break in the performance of participation banks in 2010 (the period when the crisis turned into a debt crisis in Europe) after the 2008 global financial crisis, but no break in the pandemic process. In terms of deposit banks, a break occurred in 2009, right after the global financial crisis. Other findings of the study include that the Covid-19 process did not create a break on deposit banks.