Abstract:

Aim: The aim of this study is to investigate how financial deepening affects the profitability of participation banks. In addition, variables such as non-performing loans, bank size, exchange rates, gross domestic product (GDP) growth rate, interest rates, unemployment, and inflation have also been considered in the study. Method: The panel data analysis method has been employed for the analyses. For the analyses, data from Albaraka Turk Participation Bank, Kuveyt Turk Participation Bank, Turkiye Finans Participation Bank, Ziraat Participation Bank, Vakif Participation Bank, and Emlak Participation Bank have been utilized. The study covers the period from 2005Q4-2023Q2. Findings: According to the research findings, it has been observed that financial deepening has a negative impact on the profitability of participation banks. Additionally, non-performing loans have a negative effect, while bank size and unemployment have a positive effect. Exchange rates, GDP, interest rates, and inflation variables, on the other hand, were not found to be statistically significant. Conclusions: The research has identified a negative role of financial deepening in relation to the profitability of participation banks. In addition to mitigating the adverse impact of financial deepening, participation banks should also focus on other contributing factors. Consequently, bank managements is expected to conduct in-depth analyses of these factors affecting profitability, with the aim of taking strategic steps for the future.

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