An Assessment of the Impact of the Dual Banking System on Growth through Loans in Türkiye

Turkey's dual banking system, consisting of Islamic participation banking and conventional banking, has a different structure than other countries where Islamic banking activities are carried out because it is governed by the same regulations. Within the financial system, conventional and participation banking have different characteristics. Therefore, analyzing the impact of Turkey's dual banking system on economic growth through loans is of great importance. This study uses the ARDL method to investigate the impact of loans provided by participation and conventional banks on economic growth in Turkey. The findings reveal that loans from conventional banks dampen growth, while loans from participation banks promote it. The study suggests that, rather than focusing solely on consumer loans, conventional banks should prioritize lending to the real sector to stimulate economic growth. Furthermore, supporting participation banks is crucial for overall economic development.