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Participation banking is a name given to Islamic banks mainly in Turkey, as well as in the broader MENA region. [1] [2] There are participation banks in Turkey, Pakistan, Bangladesh, Indonesia, Saudi Arabia, Malaysia, the UAE and other Gulf countries.
Participation banks operate on Islamic financial principles distinguished from conventional banking:
Participation banking share of assets in the Turkish banking sector was 2.13% in 2000, [8] 5.1% in 2012, [9] [10] and reached 7.8% or 717.3 billion TL in 2021. [11]
In 2020, top total sukuk issuers included: Malaysia, Saudi Arabia, and Indonesia. [12]
According to Ernst & Young, the assets of global participation banking reached US $930 billion in 2015, with growth rates declining across all regions compared to previous years. [13]
Integration of Islamic banking principles with modern monetary systems presents opportunities and challenges for financial reform. Islamic central banks have limited conventional monetary policy instruments. [14]
The sector has gained international recognition through regulatory frameworks. The International Monetary Fund Executive Board endorsed a proposal on the use of the Core Principles for Islamic Finance Regulation, which were developed by the Islamic Financial Services Board. [15]
From a monetary reform standpoint, participation banking presents both opportunities and challenges:
Opportunities:
Challenges:
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