Interest-Free Banking

Participation banking is a banking model that adopts interest-free banking principles, carries out all kinds of banking activities in line with these principles, collects funds on the basis of labour-capital partnership or agency, and provides funds through purchase-sale, partnership, financial leasing and other methods compliant with interest-free banking principles.

As a participation bank, Emlak Katılım provides financial services in three strategic areas — fund collection, fund utilisation and other banking services — based on its own values, i.e. remaining committed to interest-free banking principles.

In the participation banking system, funds collected from customers are utilised through various financing methods and the profit obtained is shared with the fund owners. For example, in the murabaha method — one of the principles of participation banking — a customer requesting financing purchases the goods on behalf of the bank via the agency granted to them by the bank, and repays over the agreed profit, divided across the agreed term. The profit generated by this trade model is shared among the fund owners.

Participation banks were established to bring idle funds into the economy and to secure and utilise savers’ funds. These institutions utilise the funds they collect from those with a surplus in industry and trade through interest-free financing, operating on a system based on distributing the profit to fund owners.

Participation banks do not include interest in any of their transactions. In participation banking, besides the prohibition of interest, there are also prohibitions on uncertainty and on excessive risk and speculation. In purchasing goods and services, the money is paid to the seller against an invoice rather than to the customer. Financing is always provided against a good or service. All these matters are of great importance in terms of financing real trade, supporting transactions that add value to society, and meeting the needs of people who wish to adopt the interest-free principle.