Interest free banking has been in use for 30 years in Turkey and we can divide the legal development and framework of Islamic banking into three periods. On the other hand, after enactment of Banking Law No.5411, new era opened for Islamic banking in Turkey and the term of participation bank is adopted in liue of private financial institution. On the other hand, as all kind of interest is prohibited, riba (interest) is one of the elements which directly affects the structure of an Islamic financial system and in most of the countries law system, the concept of Islamic banking is used to determine these kinds of financial institutions. From this point of view, it is vital to clarify if it is a paradox or not to use the term of participation bank in liue of Islamic bank in Turkish banking law.
Key words: Islamic bank, participation bank, riba, interest free banking, private financial institution. JEL Classification: E50, E58, F13, G18. Article Language: EnglishTurkish
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