Physical Address
Indirizzo: Via Mario Greco 60, Buttigliera Alta, 10090, Torino, Italy
Türkiye’s participation banking sector has expanded its assets by 45% so far in 2025 despite global and domestic challenges, according to a top executive who expects continued growth supported by lower inflation and interest rates.
“The sector has reached nearly TL 4 trillion (about $94 billion) in size,” Türkiye Participation Banks Union (TKBB) Chair Mehmet Ali Akben said on Wednesday. But the share of nearly 9% participation lenders hold in Türkiye’s banking market is “still quite low,” and Akben stressed that “we have a long way to go.”
The sector, which operates on a risk-sharing model, currently consists of nine active participation banks, with one more in the licensing pipeline.
The loosening in global monetary policy has begun to reflect on Türkiye, said Akben, who is also the general manager of Vakıf Katılım. But he stressed that rigidity persists in the disinflation process.
Inflation in Türkiye lastly eased to 32.87% annually and 2.55% monthly in October. Price pressures in the previous two months were above expectations, prompting the central bank to slow its rate-cutting cycle.
Akben noted that Türkiye has been engaging in external borrowing due to its savings gap, and that global inflation and interest rate decisions affect borrowing costs.
“We are experiencing a movement toward relief and entering a more positive area along with the loosening (of monetary policies). We see this reflected as a positive trend in inflation. We believe that as this (inflation) comes down to more reasonable levels over time, the process will become even better,” he told Anadolu Agency (AA).
Rate cuts, global conditions
Akben said the Central Bank of the Republic of Türkiye’s (CBRT) rate-cut cycle is closely tied to the downward trajectory in inflation. Cuts by the U.S. Federal Reserve (Fed) and the European Central Bank (ECB) have created space for other central banks to ease, he added.
“There is a misconception that higher interest rates automatically boost bank profits. On the contrary, banks prefer stability – low interest rates, low inflation and a predictable market,” he said. “Such an environment boosts investment, strengthens repayment capacity, and increases demand for financing and savings.”
Akben said he expects 2026 to bring continued growth in assets, profitability and financing activity, as inflation and interest rates fall further.
The CBRT slowed its easing cycle with a 100-basis-point cut in its policy rate to 39.5% at its latest policy-setting meeting last month, flagging renewed inflation risks that pointed to a slowdown in the disinflation process.
At the previous meeting in September, it had already tapped the brakes with a 250-basis-point reduction, having lowered the rate by 300 basis points in July as it resumed the rate-cutting cycle disrupted by market volatility due to domestic political developments earlier this year.
In April, the bank hiked its policy rate to 46% from 42.5%, reversing the easing that had begun in December amid volatility over the arrest in March of former Istanbul Mayor Ekrem Imamoğlu. He was jailed pending trial over graft charges.
Interest from abroad
Akben added that improving credit default swap (CDS) levels would help reduce Türkiye’s external borrowing costs.
He also pointed to Fitch Ratings’ recent upgrades of several Turkish banks as a sign that easing inflation and lower rates are feeding through to the financial system. “This is an important indicator for Türkiye and the sector. We hope this trend continues,” he said.
For 2026, Akben said participation banks should focus on broadening their customer base, particularly among individuals, tradespeople, artisans, small- and medium-sized enterprises (SMEs) and commercial clients.
He also highlighted interest from abroad. “We see a strong willingness for cooperation during our international meetings. We have serious engagements with the Islamic Development Bank and with institutions in the Gulf that focus on Islamic finance,” Akben said.
