Türkiye’s sovereign wealth fund, the Türkiye Wealth Fund (TWF), is embarking on a groundbreaking initiative aimed at consolidating its state-owned participation banks. Recently, TWF finalized agreements to acquire all shares of Ziraat Katılım and Halk Katılım, thereby laying the groundwork for the unification of these entities. This merger marks a significant first step towards enhancing the operational capacity of state participation banks in Türkiye, with decisions regarding the merger’s finalization expected by the end of 2026, contingent upon regulatory approvals.
The Strategy Behind the Merger
The primary objective of these acquisitions is to intensify the competitiveness of Türkiye’s participation banking sector, which has been gaining momentum in recent years. By merging Ziraat Katılım and Halk Katılım, alongside Vakıf Katılım, the government aims to develop the largest participation bank in the country. President Recep Tayyip Erdoğan highlighted this initiative in June, emphasizing the strategic importance of participation finance for Türkiye’s economic growth. Participation banking, characterized by its prohibition of interest-based transactions, offers a financial model based on profit-sharing and asset-backed financing predicated on ethical principles.
Current Landscape of Participation Banking in Türkiye
Currently, Ziraat Katılım has amassed significant assets, totaling ₺882.28 billion (approximately $17.9 billion) as of the end of 2025. This institution has created a robust workforce of 3,140 employees distributed across 227 branches domestically and abroad. Meanwhile, Halk Katılım, which received the necessary approvals in May 2025, reported assets of ₺12.9 billion, even though it had yet to commence full operations.
As of August 2026, the total assets within Türkiye’s participation banking sector reached ₺5.35 trillion, showcasing an upward trajectory from ₺3.60 trillion at the previous year’s end. Consequently, the sector’s asset proportion within the overall banking industry has increased from 8.6% to 9.6%, underscoring the growing relevance of participation banking in the country’s financial landscape.
Future Prospects and Industry Significance
The merger fosters optimism that it will further improve Türkiye’s participation banks’ capabilities, enabling them to better meet the financial needs of a diverse populace. With President Erdoğan framing participation finance as essential for the nation’s economic framework, the push for ethical banking solutions is positioned to attract both domestic and international investors seeking alternative financial models.
The significance of these developments should not be understated, as they reflect a broader shift in Türkiye’s approach to banking and finance. Engagement in participation finance could help stabilize the country’s financial system while contributing to fairer economic practices. As the merger progresses, stakeholders in the finance industry will be watching closely to gauge its impact on both the local and global scales.