Erdoğan Announces Merger of Türkiye’s State Participation Banks
By Bosphorus News Economy Desk
President Recep Tayyip Erdoğan said Türkiye will merge its three state participation banks, announcing a consolidation of Ziraat Katılım, Vakıf Katılım and Halk Katılım as Ankara seeks to scale up participation finance.
Erdoğan announced the decision on 5 June at the 3rd Global Islamic Economy Summit, held at the Istanbul Finance Center. He said the merger would create "significant synergy" by combining the strengths of the three public participation banks and would give the sector new momentum.
The move places Türkiye's state-backed participation banking system on a consolidation track. Ziraat Katılım, Vakıf Katılım and Halk Katılım operate inside the broader participation finance model, which is based on interest-free banking principles and risk-sharing instruments.
Participation banking is Türkiye's term for interest-free banking, broadly aligned with Islamic finance principles. Instead of charging or paying interest, the model relies on trade-based financing, leasing, profit-and-loss sharing and asset-backed transactions. In practice, participation banks operate like banks, but their products are structured to avoid interest while linking finance more directly to an underlying asset, service or commercial activity.
Erdoğan framed the sector as part of a wider financial architecture covering banking, capital markets, insurance, savings finance and social finance. He presented participation finance as a model with global relevance, saying it offers a more just and safer approach not only for Muslims but for the entire world.
The president also said Türkiye aims to take Emlak Katılım public, adding an IPO track to the sector's restructuring agenda. Emlak Katılım had previously started the public offering process by applying to the Capital Markets Board for approval of its prospectus.
The consolidation decision turns a long-discussed restructuring idea into an official policy signal. Earlier reporting had pointed to talks on bringing Türkiye's state owned participation banks under a larger structure, but Erdoğan's announcement gives the plan direct political backing and places it inside the government's effort to expand Istanbul's role as a financial center.
The technical details of the merger were not immediately announced. Erdoğan did not provide a timetable, shareholding structure or regulatory roadmap for the consolidation. Those details will determine whether the merger creates a stronger national participation bank, a holding-style structure or a more integrated public finance platform.
Türkiye’s financial sector will now watch whether the merger produces real institutional scale rather than only a larger public balance sheet. A combined participation banking structure could reduce overlap among state backed lenders, expand funding capacity and give interest-free finance a stronger place inside the banking system, but the outcome will depend on the governance model, the integration timetable and the regulatory design that Ankara has yet to announce.
***Sources: Presidency Directorate of Communications, TRT Haber, Reuters, Investing.com.