(Factors Affecting Participation Banks’ Profit Share Rates: an Assessment of the Proximity of the Deposit Interest Rates and Profit Share Rates)

Abstract

Purpose – The share of murabaha among the funding methods applied by participation banks exceeds 90%. The most common discussion regarding the method in question is that the maturity difference applied by these banks in the use of funds is almost at the same level with the interest rate applied by traditional banks and it is in the same direction. In this context, in this study, it was aimed to test this claim econometrically and to make an evaluation and suggestion regarding the claims that the murabaha method is like a loan with interest, based on this fact. Design/Methodology/Approach – The relationship between profit share rates and deposit interest rates, the CPI and the USD / TL exchange rate has been tested with single-break cointegration and Fourier Granger causality analyzes considering structural breaks. For this purpose, participation banks average 1, 3, 6 and 12-month dividend rates, traditional banks 1, 3, 6 and 12-month maturity weighted average deposit rates, the relationship between CPI and USD / TL exchange rate has been tested with single-break cointegration and Fourier Granger causality analyzes considering structural breaks. The data set used for the analysis consists of monthly data covering the period January 2003 and January 2018. Findings – It was determined that there was no cointegration relationship. It is determined, that there is one way casuality relationship from deposit interest rates in 1, 3, 6, 12 month(s) maturities to profit share rates in 1, 3, 6, 12 month(s) maturities in each maturity levels and there is no causal relationship between USD / TL exchange rate and CPI to profit share rates. Discussion – It can be stated that participation banks are exposed to interest risk, they should take measures against this risk, and depositors in participation banks who want to avoid interest should also consider interest rate rather than macroeconomic variables of CPI and USD / TL exchange rate when making decisions. In the study, an evaluation has been made about the fact that the interest rates of participation banks move in the same direction with the interest rates of traditional banks and are almost the same. Most of those who are interested in the issue argue that the "murabaha" method does not actually comply with the interest-free claim. In the study, it was stated that this phenomenon can be viewed from the opposite side, so it should be discussed whether the deposit and loan interest rates in traditional banks operating under the strict regulations and control of the state should be discussed.