The effect of credits extended by participation banks and conventional banks on imports

Abstract

Introduction Financial globalization and the increasing financial depth it has brought has pushed the financial sector into a search for new instruments and customers in the last century. While the existing financial system is insufficient to respond to the needs of all nations around the world, problems may arise in transferring existing capital accumulation to investments due to socio-economic and religious constraints. In the last half of the 20th century and in the beginning of the 21st century, this situation encouraged actors of the financial system to produce new solutions to incorporate the resources that were not transferred to the system into the financial cycle. All these searches brought Islamic banking (participation banking or interest-free banking) into question. The Mit Ghamr Savings Bank established in Egypt in 1963 was the first participation bank. Since then, Islamic banking has gained a growing momentum throughout the world. The need of oil exporting countries with capital accumulation in the Gulf Region for new financial instruments and the increasing demand for Islamic financial instruments from both Islamic countries and countries where Muslim population is low such as the USA and Europe have increased the importance given to participation banking. The increasing importance of Islamic finance has also attracted the attention of financial actors in Turkey. The legal infrastructure of the sector was completed in 1983. In 1985, the first interest-free banks started their commercial activities under the name of private finance institutions. They were covered by…. © Peter Lang GmbH Internationaler Verlag der Wissenschaften Berlin 2019.