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The Efficiency of Participation Banking Sector in Turkey: A DEA Approach

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Islamic Finance

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

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Abstract

There are six participation banks in Turkey, and they are expected to contribute significantly to the economy in the future. The aim of this study is to assess the efficiency of these participation banks based on financial data from 2010 to 2020. Data envelopment analysis (DEA), a non-parametric efficiency approach, is used in this study with three input variables (profit share expenses, personnel expenses, and total funds) and two output variables (profit share income and net profit). While Kuveyt Türk, Ziraat Katılım, and Türkiye Finans are found to be the most efficient, Albaraka Türk and Vakıf Katılım are inefficient—at least when the most recent observations (2018–2020) and the 4-year moving average efficiency score for both outputs and inputs are used. As for the overall average scores, Türkiye Finans is the most efficient participation bank, followed by Ziraat Katılım and Vakıf Katılım. The least efficient participation banks are Kuveyt Türk and Albaraka Türk. For participation banks to gain a larger share of the market and to continue contributing to overall economic growth, policymakers must pay attention to these underperforming banks.

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Notes

  1. 1.

    For a brief overview of the Turskish banking sector, see https://www.yapikrediinvestorrelations.com/en/share/detail/Why-Turkish-Banking-System/243/800/0

  2. 2.

    For details, see the Finance Office of Presidency of the Republic of Türkiye, https://www.cbfo.gov.tr/en/participation-finance

  3. 3.

    For more information, refer to the Banks Association of Türkiye’s website https://www.tbb.org.tr/en/home

  4. 4.

    For a brief overview of the Turskish banking sector, see https://www.yapikrediinvestorrelations.com/en/share/detail/Why-Turkish-Banking-System/243/800/0

  5. 5.

    CCR model refers to the first DEA model developed by Charnes et al. (1978) under the assumption of a constant returns to scale production technology, i.e., when an increase in the production resources results in a proportional increase in the output.

  6. 6.

    BCC model was introduced by Banker et al. (1984).

  7. 7.

    The number of observations for Türkiye Emlak (TE) is insufficient, so it has not been counted.

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Authors and Affiliations

  1. Effat University, Jeddah, Saudi Arabia

    Edib Smolo

  2. The Founder of MindSpring Sdn Bhd, Kuala Lumpur, Malaysia

    Mohamed Ashraf Iqbal

  3. Süleyman Demirel University, Ankara, Turkey

    Ayşe Akdemir

Authors
  1. Edib Smolo
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  2. Mohamed Ashraf Iqbal
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  3. Ayşe Akdemir
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Corresponding author

Correspondence to Edib Smolo .

Editor information

Editors and Affiliations

  1. Department of Finance, University of Sousse-Tunisia and University of Salamanca-Spain, Monastir, Tunisia

    Nadia Mansour

  2. Faculty of Law, University of Salamanca, Salamanca, Spain

    Lorenzo Bujosa

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Smolo, E., Iqbal, M.A., Akdemir, A. (2024). The Efficiency of Participation Banking Sector in Turkey: A DEA Approach. In: Mansour, N., Bujosa, L. (eds) Islamic Finance. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-031-48770-5_7

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