Innovation in Participation Banks: A Review on Turkey

by | Dec 5, 2019 | DOI 2018

Yusuf ESMER
Lecturer, Dr., Sinop University, The Gerze Vocational School, Program of Tourism and Hotel Management, Sinop/TURKEY
Tolga ULUSOY
Associate Professor Dr., Kastamonu University, The Faculty of Economics and Administrative Sciences, Department of Banking and Finance, Kastamonu/TURKEY
Faruk DAYI​
Assistant Professor Dr., Kastamonu University, The Faculty of Economics and Administrative Sciences, Department of Business Administration, Kastamonu/TURKEY
​DOI: https://doi.org/10.31410/EMAN.2018.115

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2nd International Scientific Conference – EMAN 2018 – Economics and Management: How to Cope With Disrupted Times, Ljubljana – Slovenia, March 22, 2018, CONFERENCE PROCEEDINGS published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia; Faculty of Management Koper, Slovenia; Doba Business School – Maribor, Slovenia; Integrated Business Faculty – Skopje, Macedonia; Faculty of Management – Zajecar, Serbia, ISBN 978-86-80194-11-0

Abstract​

Innovation is defined as a change that makes money. Innovation increases the competitive power of businesses and provides significant advantages in the competition process by creating different products or services that are provided by the competitors. Innovation is more prominent in the manufacturing sector, however, the importance of innovation has also been increasing rapidly in the service industry in recent years. As the share of the banking sector increases in the service industry, the banks also gain an importance in the service industry. Thus, innovation in banking is very important in diversifying financial instruments and increasing productivity. Increased levels of financial success have been observed with the implementation of the financial innovation process in the banking sector. It is stated that the share of participation banking in the world banking sector is increasing day by day in the studies related to banking activities. Participation banking, also referred to as Islamic finance, is developing new financial instruments in accordance with Islamic rules to compete in the world banking sector. Participation banks, which offer interest-free banking services to their customers, have developed innovative products and are offering these services to their customers to provide a better quality service. From this point on, the first part of this study reveals the historical development of the participation banks from the beginning of their establishment up until today. The role of participation banking and its importance in the banking sector has been examined from a financial standpoint. In this study, innovation procedures in participation banks are explained. The effect innovation processes have on the financial income and expenses have been examined. Despite the increase in the incomes of the banks, it was seen that the innovative processes did not directly affect the profitability of the bank. It is recommended for new models to be developed for profitability-enhancing innovative processes.

Key words

Islamic Finance, Participation Banking, Innovation, Innovation Management

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