The Possible Impact of the Islamic Window Model on the Market Share of Participation Banking: An ARIMA–Monte Carlo Simulation Analysis

The aim of this study is to empirically examine the potential impact of the Islamic window model, applicable to deposit banking in Turkey, on the market share of participation banking. The study analyzes the asset sizes and market shares of banking sectors for the period 2005–2024. The ARIMAX (Trend) model was chosen to estimate market share trends, and various scenarios were prepared for the years 2025–2030. Subsequently, Monte Carlo simulations were performed under scenarios where deposit banks adopted the Islamic window model at rates of 25%, 50%, and 75%, allocated 2%, 15%, and 30% of their assets to this model, and under positive and negative macroeconomic shock scenarios. The empirical analysis results show that as the window ratio increases, the market share of participation banking will gradually rise, potentially exceeding 10% at the lowest and 30% at the highest by 2030. The SWOT analysis results indicate that the Islamic window model has strong potential to support the growth of the participation banking sector in Turkey. The realization of this potential depends on Islamic windows being supported by strong jurisprudential oversight, a legal regulatory framework, and international standards. Finally, it has been determined that some challenges will be encountered in the application of the Islamic window model regarding jurisprudential compliance, regulatory framework, and customer trust.