Participation Banks Research Articles

Legal Framework for Impact Financing in the Digital Economy: What the Future Looks Like for the BRICS+ Countries

The article is devoted to the analysis of the legal regulation of the process of introducing FinTech in the sphere of impact finance within the context of digital technologies in the newly expanded BRICS bloc. This is a crucial step in order to be able to meet the challenges of the new global digital economy and cooperate in achieving common goals. The authors come to the conclusion that although the BRICS countries are geographically located on different continents, the states that decided to form this organization share a number of key features. Firstly, the governmental role in the digital transformation of all BRICS countries is significantly greater in comparison to the Western countries. Secondly, because not all BRICS countries have developed economies, the BRICS member states, despite their strong interest in digitalization of their countries, do not always have the capacity to finance such projects from their own national budgets, which highlights the important role of the BRICS New Development Bank in the process of digitalization of the BRICS economies. Thirdly, cooperation among the BRICS countries, through their participation in the New Development Bank in the digital realm, can significantly contribute to fostering the economic growth of each country within the integration. Since the greatest effect of digital technology penetration is achieved when starting from the lowest level, harmonization of approaches in the BRICS countries and new member countries of the bloc will most likely have a synergistic effect.

Impact of the regional financial reform on corporate financialization: Evidence from China

This study employs the data of Chinese A–share listed companies from 2007 to 2022, considers the implementation of the regional financial reform pilot zone policy as a quasi-natural experiment, and tests the impact of this reform on the financial asset holdings of nonfinancial firms by using a difference-in-difference model. Based on the findings, the regional financial reform restrains the financialization of nonfinancial firms through two paths: 1) promoting profit equalization, which reduces the return gap between real and financial investments; and 2) balancing the allocation of credit resources, which curbs corporate participation in shadow banking. Further analysis showed that the governance effect of the regional financial reform is especially prominent for firms in regions with lower administrative, market development, and financial development levels, especially in the central and western regions. In the economic consequences test, we found that the dampening effect of the regional financial reform on corporate financialization can promote real investments, especially innovation investments. These findings not only enrich the research on the determinants of corporate financialization and the economic consequences of the regional financial reform, but they also provide insights for financial reforms in other emerging economies.

Evaluation of the Fundamental Differences that Distinguish Participation Banking from Deposit Banks in Turkiye

Participation banking, or, more broadly, participation finance, continues to exist as a sector different from deposit banks in principle, purpose, and practice, developing at national and international levels. Understanding the difference between participation banking and deposit banks also provides accurate observation of the operation, processes, and results reflections. For this reason, this study examines the fundamental differences that separate participation and conventional banks from each other. Firstly, the study includes elements that differentiate participation banking conceptually and based on basic operating principles. The different structures of participation banks in pricing and balance sheets constitute the basis of the operating mechanism. For this reason, fund collection and allocation methods are explained in detail together with this structure. As a result, the participation banking sector, which continues its development as an alternative finance, was born from a different approach and has differentiated itself from deposit banks in many areas. Knowing these differences is essential in supporting the correct reading and analysis of the sector.

THE EFFECTS OF DIGITALIZATION ON EMPLOYEES' JOB SATISFACTION: AN APPLICATION ON EMPLOYEES IN PARTICIPATION BANKS

This study investigates the effects of the digitalization process on the job satisfaction of employees in participation banks. During the pandemic period, technological efforts that allow banking transactions to be carried out contactless and remotely have accelerated, and suitable financial products have been put into service. Participation banks have swiftly adapted to the digitalization activities observed in the banking sector, much like their counterparts. By offering digital products that adhere to Islamic principles, customers can remotely and contactlessly conduct their banking activities. This transformation has had an impact on the employees of participating banks. The study examines the effects of digitalization on the work lives of employees in participating banks through the administration of a survey. Considering the demographic characteristics of the workplace, the job satisfaction levels of employees have been measured. The effect of digitalization on the job satisfaction of employees was also measured by regression analysis. In the findings, internal and external satisfaction with digitalization were measured. According to the measurement results, it was found that digitalization positively increases the job satisfaction of employees in participation banks.

TURKISH PARTICIPATION BANKING WITH THE IMPACT OF DIGITAL BANKING: 2020 - 2023 PERIOD ANALYSIS AND EVALUATION

Participation banking is one of the banking types operating in line with Islamic principles. As is known, the banking sector is one of the most technology-intensive sectors today. The healthy and sustainable development and digital transformation of participation banking is gaining momentum in Turkey as in the global financial sector. The prominent factors in digital banking are mobile banking usage, call centre statistics, total number of digital customers, transaction volume and transaction distribution of participation banks. In this study, it is aimed to make a digital analysis and evaluation of Turkish Participation Banking. Thus, capturing future trends in participation banking, ensuring sustainability and strategic planning analyses can be designed much more efficiently. The analyses cover the period 2020-2023. The fact that the analysis period coincides with the beginning of the pandemic is also meaningful in terms of the effects of the digital outlook, which gained momentum after the pandemic, on participation banking. For example, while the number of customers acquired in remote customer acquisition statistics was 23,618 in the last month of 2021, it corresponds to a proportional increase of 148% with 58,594 in the 9th month of 2023. While digital banking active customer usage was 81.36% only in mobile banking in the 2nd period of 2020, it was 88.86% with an increase of 7.5% in the 2nd period of 2023. As a result of this study, it is expected that participation banking will become more widespread in the future and competition with conventional banks will gain a different dimension in the field of digitalisation.

Musharakah for Small and Medium Enterprises as an Alternative Financing Mode

The current study examines the Musharakah viability as a potential financing method for SMEs in Pakistan. SMEs face exertion to get external financing, that prevents them from continuous development and growth. Small and Medium Enterprises (SMEs) are prone to financial resources constraints as compared to large organizations, who easily manage to meet financial institutions' collateral needs. The study is based on the primary data collected from 101 SMEs who had taken the Musharakah financing facility from the Islamic institutions of Pakistan. The required data is collected through a structured questionnaire from the SMEs to determine the owner’s satisfaction level with these Musharakah facilities in Pakistan. The findings of the regression model depicted that risk-sharing, access to financing and knowledge have a significant relationship with the level of satisfaction. Besides, the study found a statistically insignificant relationship between the profit and loss sharing, bank participation, and satisfaction level of the SMEs owners in Pakistan. The study concluded that Musharakah financing features could be a viable alternative financing SMEs mode in Pakistan.

Artificial Intelligence in Banking Internal Demand Management Systems: The Example of Vakıf Participation Bank

Artificial Intelligence in Banking Internal Demand Management Systems: The Example of Vakıf Participation Bank

A HYBRID FRAMEWORK BASED ON PSI AND CRADIS METHODS FOR ASSESSING CORPORATE FINANCIAL PERFORMANCE

The aim of the present paper is to analyze corporate financial performance in the banking industry. For this purpose, the present manuscript presents a new hybrid decisionmakingmodel consisting of PSI and CRADIS procedures. In the developed decision-making model, PSI objective weighting methods are employed to assign significance weights to the criteria, while CRADIS, a relatively new algorithm, is utilized to rank bank financial performance. The proposed decision-making model was employed to evaluate the financial performance of Kuveyt Turk Participation Bank. Sensitivity and benchmarking analyzes were conducted to check the robustness of the introduced decision-making tool. According to the findings of the study, the most important criterion in determining the financial performance of the relevant participation bank is the ratio of total loans to total assets. Furthermore, the CRADIS technique’s results show that, while financial instability is present in bank performance in general, there is a notable improvement in bank performance following 2015. Moreover, sensitivity and comparison analyzes prove that the integrated framework in this study is a powerful, reliable and useful decision tool that can be used in assessing the financial performance of banks.

Adoption patterns of profit-sharing based deposits: empirical evidence from a Muslim majority country

Purpose This paper aims to examine the antecedents of adoption intention of profit-sharing investment deposits (PSID) among Moroccan customers. Design/methodology/approach Applying an extended version of diffusion of innovation (DOI) theory and using a non-probability sampling technique with convenience approach, a quantitative survey was developed and administered to 171 Islamic banking users. Structural equation modeling was then used to evaluate the significance of relationships between the various variables under study using SPSS 21.0 and AMOS 26.0 statistical packages. Findings Empirical findings of the structural analysis indicated a significant direct relationship between adoption intention and six out of seven variables: perceived relative advantage, perceived compatibility, perceived complexity, perceived risk, religiosity and social influence, all of which had a significant effect on Moroccan customers’ intention to invest their funds in profit-sharing based deposit instruments, whereas customer awareness exerted an insignificant positive effect. Research limitations/implications The absence of a longitudinal study tracking the actual adoption behavior is the main limitation of this study. Furthermore, data were collected solely from Islamic banking users. Finally, despite being insightful, the empirical findings should be generalized with caution since the sample was purposely selected by the banks’ management. Practical implications This study implied that participatory banks should pay substantial attention to risk perceptions, as PSID adoption intention is typically inhibited by high perceived risks associated with these products. Moreover, this study provides great indications to Moroccan regulators and policymakers on a number of issues related to this emerging business. Originality/value To the best of the authors’ knowledge, this paper represents the first attempt to confirm the effectiveness of the Rogers’ DOI in examining the intention to adopt a financial innovation in the Moroccan context. It is also the first of its kind to address customers’ apprehensions regarding profit-sharing investment products.

Determination of Performance Ranking of Participation Banks with CIRITIC-Based TOPSIS Method

Determination of Performance Ranking of Participation Banks with CIRITIC-Based TOPSIS Method

Performance assessment of participation banks based on Maqasid al-Shari'ah framework: Evidence from Türkiye

In a dual banking system, participation banks (PBs) are expected to follow Islamic principles, morals, and ethical norms, all of which ultimately align with Maqasid al-Sharia'ah (MS). This study aimed to assess performance of PBs in Türkiye beyond traditional yardsticks to accentuate their ethical, social, and financial roles compliant with the axioms of MS. A mixed method deploying qualitative and quantitative inquiry was used. The first stage used text mining, and the second stage developed the MS Performance Index (MSPI) by adopting entropy weights based on the Ghazalian perspective. The datasets were derived from 18 reports for 2019–2021. Türkiye Finans appeared to have the highest score, whereas Ziraat received the lowest on MSPI scores. PBs achieved the highest scores for the wealth objective component and the lowest score for the intellect component because they became market-oriented and thus their disclosures did not support and promote MS.

Match or Mismatch of Expectation-Realization Behind the Motives in Supporting Social Entrepreneurship Programs

Abundant studies regarding motives in social enterprise have been conducted but have barely explored the gaps between motivational expectations and realizations. Particularly in waste bank studies, such a study has yet to be scholarly discussed. Using expectancy theory and mismatch hypotheses, this study explored the motives in waste bank participation towards owners/managers and customers and measured the gaps between the motive expectations and realizations. Quantitative comparison tests were employed on 45 Indonesian waste bank owners/managers and 162 customers whose data were collected directly and through online surveys. The findings reveal that the most expected motive was the environmental, while the least was the economic; this went for both waste bank owners/managers and customers. The results also show that severe mismatches occurred between expectations and realizations, in which the most significant gap for waste bank owners/managers was educational, while the environmental motive was the biggest for customers. This study's findings enrich the social entrepreneurship literature by showing that the motives per se are insufficient to reveal individuals' actual situations in supporting the social programs, as disparities are very likely to occur between expectations and realities. The gap analysis in this study provides a different alternative to conducting studies related to the underlying motives for supporting social entrepreneurship programs.

The Role of the IBSA Fund in Foreign Aid Policies of IBSA and BRICS Member States

The IBSA Fund, which marks its 20th anniversary in 2024, has extended SouthSouth cooperation to 34 states since its establishment in 2004. This article aims to compare the recipients of bilateral development assistance from IBSA members with IBSA Fund projects’ partners. The objective is to discern the motivations behind the selection of the Fund’s project partners, assess the influence of member states on partner selection, and explore the potential benefits of including Russia and China (both BRICS and New Development Bank participants) as members. The authors analyze the structure, mechanisms, and priorities of IBSA projects, juxtaposing them with New Development Bank projects to highlight key differences and assess shortcomings. The research draws on releases and reports from development agencies, AidData databases, and online databases detailing cooperation projects of all IBSA members and the IBSA Fund. The analysis reveals that the IBSA Fund serves as an additional tool for member states in development cooperation, driven by shared opportunities and responsibilities. Partner selection appears largely motivated by the national interests of IBSA states. While both the IBSA Fund and New Development Bank espouse similar development principles, goals, and narratives, they exhibit differences in terms of development cooperation modalities, emphasis on loans versus grants, project geography, and priorities. As this makes closer cooperation between the two entities unreasonable, Russia and China, whose development assistance priorities largely align with those of the IBSA members, could still be included in the IBSA Fund mechanism, particularly if additional funding is required.

Analyzing the Hierarchical Structure of Enablers Affecting Indian Banks’ Merger and Acquisition Financing Decisions

Mergers and acquisitions have been important means of company expansion, restructuring, and diversification. In mergers and acquisitions, Indian banks play a critical role. The study aimed to discover, determine, and create an empirical model that evaluates the interdependence and interaction of enablers. Through literature and unstructured interviews, 10 enablers influencing Indian banks’ financing decisions for merger and acquisition transactions were identified. Total interpretive structural modelling (TISM) and the Matrice d’Impacts Croisés Multiplication Appliqués à un Classement (MICMAC) technique establish the relationship between identified enablers. Governance and regulatory framework, political stability, and economic stability are major independent enablers for financing mergers and acquisitions. Transparency and disclosure, infrastructure, technical skills, and information communication technology act as linkage enablers for the participation of banks in merger and acquisition transactions. The study makes a novel contribution by identifying enablers through a literature search and ‘experts’ opinions. The TISM model determines the priority of the enablers by displaying hierarchical interconnection and dependency. This study reviews the literature to generalize the findings and focus on significant drivers for increased investment. To encourage merger and acquisition activity, practitioners must focus on elements with significant driving power. It will assist the practitioners, managers, and authorities in prioritizing their efforts.

Loan guarantees in a crisis: An antidote to a credit crunch?

Credit contractions are costly, but policymakers have limited tools to counter them. In this paper, we examine the efficacy of public credit guarantees as antidotes to a credit crunch by studying the Paycheck Protection Program (PPP). We find that the program averted a historic credit crunch at a time when banks were unlikely to meet firm credit needs by risking their own capital. Our evaluation incorporates selection effects emanating from banks’ participation decision on both the extensive and intensive margins. Risk-aversion, rather than profitability, motivated bank participation in the program. Indeed, even as the program boosted loan growth among participants, it attenuated profitability.

Nonbank lenders as global shock absorbers: Evidence from US monetary policy spillovers

We show that nonbank lenders act as global shock absorbers from US monetary policy spillovers. For identification, we exploit monetary policy surprises and the global syndicated lending market, where detailed loan-level data allow us to compare the participation of banks and nonbanks in the same loan. When US policy tightens, dollar credit to non-US firms falls, but nonbanks increase credit supply (relative to banks), thereby mitigating the total credit reduction. This relative increase is stronger for riskier non-US firms, proxied by emerging market firms, high-yield firms, or firms in countries with stronger capital inflow restrictions. Finally, there are real effects associated with the international nonbank channel of monetary policy, as firms with better access to nonbank credit relatively increase total corporate debt, investment, and employment.

Information environment and participation of foreign banks in U.S. syndicated loan market

This study examines how financial information quality affects the participation and lending behavior of foreign banks in the loan syndicate of U.S borrowers. We utilize the implementation of the Sarbanes-Oxley Act (SOX) in the U.S. as our research setting. We demonstrate a significant increase in foreign banks loan shares to public firms in the post-SOX period. In parallel, we find that this increase in lending by foreign banks is accompanied by more favorable price and non-price contract terms. By contrast, we find no evidence of either more loans or more favorable loan contract terms offered to U.S. privately held borrowers by foreign banks. Further analysis shows that the impact of such an exogenous change on loan contract terms are more pronounced among public listed borrowers with higher ex ante information asymmetry. Overall, our findings imply that the increase in quality and reliability of corporate financial information brought about by SOX reduces the information disadvantage of foreign lenders.

The Efficiency of Participation and Conventional Banking in Turkiye: A Stochastic Frontier Approach

The efficiency of conventional and participation banks in Türkiye between 2011 and 2016 is examined in this research using stochastic frontier analysis (SFA). The primary goals of this research are the analysis of the Turkish banking system's cost-effectiveness, a comparison of the efficacy of conventional and participation banks. The empirical research was based on a sample that included panel data for three participation banks and 23 commercial banks that had been in operation continuously. The one-step approach permits control of firm- and country-specific variables as well as Shariah-compliant banking directly in the estimated frontier, allowing any differences in technology and output that are caused by differences in the two banking systems' operational characteristics. According to the SFA statistics, participation banks are less efficient than regular banks overall. According to the findings, inflation and interest rates are statistically significant for the chosen external factors and negatively affect Turkish banks' cost-effectiveness, particularly between 2012 and 2014.

The Effect of Inflation on Fund Supply of Participation Banks: An Application to Türkiye with ARDL Approach

The primary economic variable that threatens price stability is inflation. Since inflation directly affects the quality of life standards of every individual living in a country, it is one of the most important problems for economies. The aim of this study is to investigate the effect of inflation on the fund supply of participation banks. The relationship between the amount of funds offered to the market by participation banks operating in Turkey and the CPI values were analyzed at monthly frequency for the period between of 2012-2022. In order to determine the stationary of the series, the structural break ADF unit root test were used and ARDL were preferred as the estimation model. According to the results of the analysis, inflation affects the fund supply of participation banks negatively in the short term. On the other hand, a positive significant relationship between inflation and participation banks fund supply was found in the long run. All in all in an inflationary environment, the loans offered by the participation banks to the markets follow a U-shaped trend, first decreasing and then increasing and increases in inflation rates threaten the credit growth of participation banks. In addition, we pointed out that it is a necessity to bring inflation rates to a modarate level so that participation banks are not excluded from financial markets in Turkey.

Analysis of Developing Commercial Bank Green Finance Programs

Contemporarily, global climate change and the depletion of traditional resources have fueled the rise of environmental awareness, making environmental protection and sustainable development an international trend. The active participation of commercial banks in green finance not only enhances their reputation but also helps to gain social support. The study discusses the importance of commercial banks' active participation in green finance in the context of global environmental protection and sustainability trends. The study highlights the theoretical and practical significance of Chinese commercial banks in green financing, and introduces the policy measures and innovative products of ML City Agricultural and Commercial Bank in promoting green finance in the region. In addition, the article mentions an innovative rural insurance product called "Green Farmer Insurance", which aims to help farmers cope with weather- and environment-related risks and promote sustainable agricultural practices. Theoretically, the green financial business of Chinese commercial banks is relatively lagging, and more relevant theories are needed to enrich and improve it. In fact, under the national strategies of peak carbon and carbon neutrality, green development has become an important theme that requires a large amount of green investment, and financial institutions are the main driving force of green finance.