Abstract
Interest-free banking became important issue in the world in the1960s, and in Turkey in 1980s, respectively. Interest free banking, which is named “participation banking” in Turkey, is a new method in that it is significantly different from conventional banking on fund collection and use. Participation banks have offeredtheir customers different alternatives from conventional banks both in Turkey and in the world. This shows the capacity of participation banks as an alternative to commercial banks as well as their complementary role in their functions. Economic policies should be sustainable and support real sector. If public deficits, governmentborrowing requirement and risks are too high, it would be difficult for investors to make their investment decisions. Participation banks which support real sector are cures to both the global and local economic crisis. The commercial banks are expected to exhibit similar functions.
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