The banking sector in Türkiye continues to show growth in line with the increasing interest in Islamic finance, although the sustainability of this development depends on improvements in operational productivity. This study evaluates the comparative productivity performance of participation banks and conventional banks in Türkiye during the period 2019–2023 using the Malmquist Productivity Index (MPI) approach. The analysis covers 10 conventional banks and 6 participation banks, with labour costs, administrative costs, and third-party funds as inputs and financing and operating income as outputs. The results show a downward trend in productivity in the banking industry. Participation banks witnessed a decline primarily due to weaker technological change, despite gains in efficiency change. In contrast, conventional banks exhibited relatively better productivity performance. Findings from Malmquist’s quadrant analysis also revealed that technological adoption has indeed been implemented by the Turkish banking sector, but overall efficiency improvements remain at a moderate level. Overall, the results of this study provide important implications for regulators and financial institutions in developing strategies to increase productivity and improve competitiveness during the dynamics of the dual banking system operating in Turkey.
Akkaş et al. (Mon,) studied this question.