INTEREST-FREE BANK AND ITS FUNCTIONS

I — BANK CONCEPT

We will try to define the concept of bank under two subheadings.

A — Bank in the Classical Sense

Today, in countries where the market economy is active, the bank is one of the basic institutions of the economy that carries out business related to money and credit. Classical banks are institutions that carry out loan, investment capital, money and payment transactions, as well as service transactions such as acceptance of trust, safe deposit box rental, bill collection, intelligence and examination. (Aziz Köklü, 1967, p. 25-63). These institutions continue their functions with the income they earn as interest. A bank is an institution that continues its activities with the monetary difference (interest) it provides by letting others use the unconsumed part of the purchasing power of some people in society, which they obtain through production or other means. Here, the bank is an intermediary institution. Institutions that regulate various transactions related to money, capital and credit and meet the needs of public, private and legal entities in these areas are called banks. (Tezer Öcal, 1978, p. 11). In short, in the classical sense, banks are "commercial institutions that earn profits by charging interest by dealing in money and all the payment instruments that serve its function" (Ayten H. Eti, 1957, p. 5). Classical banks engage in "Credit Trading" as well as trading in instruments of exchange.

Considering the above-mentioned issues together, the classical bank is a bank that lends and places the unspent portion of the income earned by the public in a certain period in return for interest, intermediary in payments between individuals or legal entities, money transfer, bill collection, trust acceptance, etc. It can be defined as a business established for profit that provides services such as. (Seyfullah Çevik, 1984, p. 3). Classic bank definition

As can be understood from the above, it is an intermediary institution established to make profits by trading money and credit.

B - Interest-Free Bank

Interest-Free Bank is based on approaches completely different from the basic approaches of classical banks and is an organization established with the status of a non-profit foundation (1). Interest-free banks should not engage in the trading of instruments of exchange. Because the excess or deficiency provided in the trade of means of exchange is a type of interest, directly or indirectly.

Interest-Free Bank regulates credit between savers and investors, supports stocks by providing liquidity, and provides accounting, transaction, legal services, promotion, surety, etc. of private and legal entities. It is a non-profit organization that provides general services such as. The capital of such a bank to be established with foundation status can be provided by individuals or by financial support provided by foundations or non-profit legal entities to be established throughout the country (2). Natural and legal persons who are partners of these organizations will be able to benefit from the bank's services in proportion to their contribution to the foundation's capital. The Bank will enable the partners of the legal institutions that support it to benefit from its opportunities and prepare the environment for some of the general services of the natural and legal persons it supports to be provided by these institutions. The Interest-Free Bank, which will be established with the status of a foundation, will not make a profit in return for its transactions and will cover its expenses from the special resources it will create. Before briefly stating the features of Interest-Free Banks, which are quite different from classical banks, it would be useful to briefly define some concepts. Because these concepts will be used frequently when explaining the model.

C — Some Concepts About Interest-Free Banking

As it is known, human beings have to consume to sustain their lives and produce to ensure continuity in their consumption. Human production and consumption activities take place within a certain community. During such activities, people have receivables and debts towards other people regarding goods. People's debts and receivables regarding goods are called economic rights. Economic rights are expressed in values that can be measured in money. In other words, economic rights can be priced. And it can be paid in cash. The Interest-Free Bank regulates the debts and receivables, that is, the economic rights, of natural and legal persons, and performs certain duties to increase economic cooperation and solidarity. A brief explanation of the following concepts related to economic rights will help understand the functions of the bank.

1-— Rights in Rem: These are the rights of a person over a certain item. Such rights are paid by returning the goods in kind.

2-— Embezzlement Rights: These are the rights of a person over similar goods, not over a certain property. The debtor pays his debt by paying for similar goods. Due to the spread of economic activities, debt and credit relations between people have also increased. The increase in embezzlement rights, most of which are not rights in rem, necessitated the establishment of institutions that regulate debts and receivables and prevent the parties from suffering (3). Interest-Free Bank will deal with the protection of embezzlement rights of natural and legal persons.

3- Debt (Deyn): The receivable in which the increase or decrease belongs to the debtor is called deyn (debt). Qard and deyn (debt) are two concepts close to each other. Every qard is a deyn, a debt. But not every deyn (debt) is qard. (Ömer Nasuhi Bilmen, Sixth Volume, 1970, p. 94-95). For example, 5000 taken from someone else. - TL is both a loan and a loan. However, taking the price of something sold, taken by force or rented is not a loan. If the loan is similar, the same is taken. The interest-free bank is responsible for the increase or decrease of the loaned item. Private or legal entities transfer the values given as loans exactly when regulating their debts. In the interest-free application, any increase or decrease in the values subject to the debt belongs to the debtor. Regardless, the creditor wants to get more than he gives.

On the other hand, qard will be an outstanding receivable. The creditor has the right to request it before the due date. Qard and dayn are under the legal guarantee of the state. There is no economic guarantee. Even though the qard is stated in advance of its due date, it can be requested before the due date. Credit cannot be requested. The loan is under the interest-free bank's guarantee, both legally and economically.

4- Trust (Deed): Any increase or decrease in the values given as trust belongs to the owner and the creditor. The escrow transaction takes place depending on offer and acceptance. Any damage or loss that may occur in the entrusted goods beyond the will and power of the person entrusted to him belongs to the owner of the property. Likewise, increases that occur without the personal effort and work of the entruster belong to the owner. (Ömer Nasuhi Bilmen, vol. 4, 1969, p. 155-156).

Interest-free bank escrow will be accepted. However, the main purpose of this institution will be an intermediary organization that regulates debt (deyn) relations between natural and legal entities.

Due to the intensification of economic activities, embezzlement rights have increased among people rather than real rights, and it has become necessary to establish institutions that regulate these rights and ensure economic solidarity and cooperation between people that people trust and protect the values they own. Classical banks are the basic institutions of today's economy and require the establishment of increasing economic activities due to economic development. It would be useful to briefly consider and examine the development history of the banking institution.

II — THE BIRTH AND HISTORICAL DEVELOPMENT OF THE BANKING INSTITUTION

Banka kelimesinin ne zaman banka müessesesini ifade edecek şekilde kullanıldığı kesin olarak bilinmemekle birlikte, konu ile ilgili eserlerde çeşitli rivayetler yer almaktadır. En çok taraftar bulan anlatıma göre, orta çağın sonlarına doğru, haçlı savaşlarının etkisiyle önce Güney Avrupa'da daha sonra bütün Avrupa'da ticarî faaliyetler yaygınlaşmış ve Feodal Beylikler arasında artan ticarî faaliyetler, çeşitli ağırlık ve şekilde değişim araçlarının dolaşıma çıkmasına neden olmuştur. Metalik olan birbirinden farklı paraların metalik içeriğini belirleyen ve paraları değiştiren bir uğraşı alanı meydana gelmiştir. Bu işlerle uğraşanlar, işlerini bir sıra veya masanın arkasında sürdürmekteydiler. İtalyanca bu sıra veya masalara «Banco» ve bu masaların arkasında durup para değiştirme ve metalik değerlerini belirleyen sarraflara zamanla «Banker» ve işyerlerine ise «Banka» adı verilmiştir.

In fact, in every society where exchange is common, there are institutions that provide the necessary trust for debts and receivables, which determine the value of the means of exchange that facilitate exchange. B.C. In Mesopotamia, where the market economy was active to a certain extent in the 2000s, banking business was simply carried out by temples. In the cities of Sumer and Babylon, priests carried out a kind of banking business, recorded debts and receivables on baked clay tablets and used the temples as a kind of bank. In the laws of Hammurabi, it was stated how the banking temples would carry out their loans, how the debt should be paid on maturity and how the debtor would repay the debt, and the upper limit of the interest that could be charged on different goods was determined. .

In ancient Greek societies, in the early periods, temples conducted banking and regulated debt and receivable transactions. While banking activities were previously carried out freely, later the regulatory and guiding intervention of the state in this field increased.

In the Ancient Egyptian society, where economic activities were carried out under the control of the state, banks called "Royal Banks" regulated debt and receivable affairs. These organizations, which carry out the financial affairs of the state, gave short and medium-term loans to individuals.

In the regions under the rule of the Roman Empire, banking affairs were regulated by law, and it was considered a legal obligation for institutions carrying out banking activities to keep cash deposits and journal books properly and to show them to officials when requested. (Seyfullah Çevik, 1984, p. 7)

Ortaçağın ilk yüzyıllarında Avrupa’da hakim olan feodal yönetim belli bir toprak parçası üzerinde iktidarını toprak mülkiyetine dayandırmıştır. Bölgeler arası ticaret, siyasi istikrarsızlık ve güvensizlikten dolayı oldukça sınırlıydı. Üretim yerel ihtiyaçları karşılamaya yönelikti. Mübadele önemli ölçüde aynî olarak yapılmaktaydı. Üretimden ziyade tüketime yönelik kredileri yüksek faizle gezici banker denilebilen Yahudi ve Suriyeliler sağlamaktaydı.

XI. yüzyıldan itibaren İslâm Dünyası ile askerî ve ticarî ilişkileri yoğunlaşan Avrupa’da para kullanılması yaygınlaşmıştır. Metalik paraların içerdiği metalin cins ve miktarını belirleyen ve değişik derebeyliklere ait olan paraları değiştiren sarraflar zamanla çok zenginleştiler. Yukarıda değinildiği gibi bir masa veya sırada paranın tartılma ve değiştirme işini yaptıkları için kendilerine “Bancheri» veya “Bancherius» denen ilk bankerler para değiştirmenin yanında çeşitli ödemeleri yapma, kredi verme ve madenî paraları kontrol etme gibi hizmetleri de fiilen veya resmen yapmaya başladılar. Tüccarların paralarını koruyan ve kentin dışındaki diğer ticaret merkezlerinde de düzenledikleri senet, poliçe vs. gibi ödeme yollarıyla tüccarlara yardımcı olan bankerler bölgelerarası ticarî faaliyetlerin artmasına bağlı olarak servetleri ve faaliyet alanları genişlediğinden günümüz bankalarına benzer şubeler kurarak bankacılık hizmetlerini arttırdılar. Zaman zaman güveni sarsıcı uygulamaların baş göstermesi devletlerin, bankerlerin faaliyetlerini düzenleyici ve yönlendirici görev ve yetkilerinin artırılmasını gerektirdi.

In Europe in the 15th century. Since the beginning of the century, banks have been established under the leadership of municipalities, first at the city level. The Municipal Council of Barcelona, Spain, decided to establish the "Municipal Bank of Barcelona" in 1401. Shortly after, the Bank of Genoa was founded in 1408, the Bank of Venice in 1584, and the Bank of Amsterdam in 1630, which saw an important part of the Modern Banking Services and gained the trust of the people in the Netherlands.

The increase in commercial activities at the European and International levels expanded the scope of banking services and made it necessary for the state to intervene in this field. XVII. Starting from the end of the century, banks began to be established to regulate banking affairs and print and circulate money on behalf of the state. The Bank of England was founded in 1694. In other European countries, in the 18th century. and XIX. In the 19th century, Central Banks were established and the job of printing money was given to these banks. Private banks began to be organized as joint stock companies with multiple branches (4).

In the Islamic World, there has been no institutionalization in the field of banking similar to the developments in the West. The savings were entrusted to more well-known close relatives and the entrusted savings were not converted into long-term investments. The conversion of savings into investments was managed through "Mudaraba" companies. In the partnership established between the laborer and the saver in Mudaraba, profit and loss were shared jointly, and the sharing of profit and loss was determined by agreement. In case of loss, the saver would bear the loss, and the laborer would participate in the loss by not receiving compensation for his labor. (Murat Çizakça, p. 28-37).

In the Ottoman society, savings were not only evaluated through mudaraba, but also were directed to production activities through salam and murabaa. As it is known, unlike shopping on credit, salam is an exchange of money first and then of goods. By paying money first, it is ensured that the goods are purchased at a cheaper price than the current price at maturity. Money is purchased in advance and goods are purchased on credit (Mustafa Akdağ, 2, 1974, pp. 259-262). This system is still common in our country, especially in agriculture. Its objectionable results arise from the fact that it is not supported by an institution such as the state or a bank.

Today, Classical Banks are the basic institutions that play an active role in the regulation of economic activities. The functions of some of these organizations have transcended national borders and begun to be fulfilled in the international market. Today, banks, like the arteries and veins of economic activities, direct the country and the world economy, especially through loan transactions. Bank revenues, which are largely generated by the interest they receive on their transactions, have increased depending on the volume of transactions made, and the economic power of the companies owned or supported by banks has grown. National or international companies either established banks themselves or had to rely on the support of a bank. Today, it is not possible for private and legal entities to be large and effective in economic activities without the support of banks.

The large-scale increase in the activities of classical banks at national and international levels has caused some economic and social problems. There are close relationships between the inadequacy of the classical banking system and problems such as increasing inflation, widespread unemployment, increasing imbalance in income distribution between individuals and countries, the effects of monopolistic tendencies being felt in national and international markets, and the imbalance of resource use and distribution in the world. In other words, it is not possible to solve the problems mentioned above without changing the structure of classical banking. The high intensification of national and international economic activities at the economic level today requires a reconsideration of the Classical Banking system. XIII. and XIV. Classical banks, which were founded on the basic principles developed by merchants and bankers in the centuries, cannot adequately fulfill their economic functions today, when parallel interests between private, legal and public institutions have become widespread.

We believe that with the "Interest-Free Banking Model" that we will try to present in this seminar, we will shed light on the regulations that will be mandatory in the banking system in the future. We believe that the interest of universities, research institutions, business circles and public institutions in examining this issue at a scientific level will facilitate the solution of the economic and social problems encountered. Before stating the basic functions of interest-free banks, it would be useful to briefly consider the difference between interest-free banks and classical banks.

III — HISTORY AND CHARACTERISTICS OF INTEREST-FREE BANKING WORKS

As it is known, religions and philosophers in every age and period until the 17th century opposed interest and revealed the problems caused by interest. Today, there are economists and thinkers, especially JM Keynes, who reveal the economic and social problems caused by interest. In recent years, theoretical studies have been carried out across the country and the world regarding the establishment of interest-free banks, and various institutions have been established for this purpose. First, the historical development of the Interest-Free Bank studies will be briefly discussed, and then the determining features of the Interest-Free Bank will be tried to be stated.

A — History of Interest-Free Banking Studies

Today, we do not know that there is an interest-free bank that fulfills its banking functions without interest-bearing transactions and has the qualifications mentioned here. Existing banks established under the name of interest-free banks actually appear to be commercial companies rather than banks (5). Theoretical studies are needed on this subject. It can be said that the scientific studies on which the work of today's interest-free banks are based are quite inadequate. Then, carrying out the activities of banks as production and trading companies may result in banking services not being carried out effectively.

In recent years, studies on interest-free banking in the Islamic World and the West aim to determine the principles of profit sharing. In our opinion, although these studies are the product of a great effort, they have not been able to reveal how to establish and operate an interest-free bank, different from classical banking, and how to realize interest-free credit in an inflationary environment. The studies in question have not clearly demonstrated how an interest-free bank will channel savings into investments today (6). We believe that continuing such studies, which can be considered as preparation for future theoretical studies, will yield beneficial results.

The first institution advocating interest-free banking transactions was established in Egypt in 1963 under the name of "Savings Bank", and later similar institutions started operating in many countries. The Islamic Development Bank was established in 1974 to carry out interest-free banking activities among Muslim countries. Türkiye was among the founding partners of this bank. There are two organizations in Turkey that provide banking services under the name of Private Finance Institution (in 1987). Since this seminar will focus on the theoretical principles on which a different interest-free bank is based, the activities of existing banks will not be evaluated. After briefly discussing the salient features of the "Interest-Free Banking Model" that we propose, the functions of the bank will be briefly pointed out.

B - Features of Interest-Free Bank

The features that distinguish the proposed interest-free bank from classical banks can be listed as follows:

— The capital of the interest-free bank will consist of gold borrowed from private and legal institutions. Those who loaned gold will have their horses returned to them in kind, if they wish.

— The proposed interest-free bank will not be a profit-oriented institution. The bank will be established as a foundation or as a Joint Stock Company established by foundations (7). Companies that benefit from the bank's services make profits and losses.

It is an intermediary institution in interest-free bank credit and debt transactions. Any decrease or increase in loans and debts belongs to the debtor. The bank is a broker, not a merchant. It does not directly bear the risk. If the parties fail to fulfill their commitments, they pay as guarantors and then have recourse to the borrower's guarantor or counterpart.

Increases and decreases in the values received by the bank as trust, which are not due to the faults or errors of the bank managers and officials, belong to the owner. Decisions regarding the loans to be given by the interest-free bank or the institutions whose bills will provide liquidity will be taken according to predetermined criteria. Personal decision-making powers of bank managers will be minimized as much as possible. If benefiting from the services of interest-free banks is left solely to the personal decisions of managers, it may cause monopolization in such banks. The basic principles of benefiting from the bank's operations will be determined in contracts and announced in advance; Private and legal persons will be given the opportunity to benefit from these principles. Interest-free deposits deposited in the bank are given as loans and the bank transfers these loans to private or legal persons. Both the legal and economic risks of the loan are under the guarantee of the Interest-Free Bank,

IV — FUNCTIONS OF INTEREST-FREE BANK

Since the functions of the Interest-Free Bank will be explained in detail in the communiqués to be presented from now on, they will only be mentioned here. The functions of an interest-free bank can be summarized under three headings:

A - Crediting Function

Interest-free banking provides credit for the evaluation of the savings of private and legal persons. Here, the saver's values are given as a loan to those in need. After paying the debt, the borrower makes available to those who benefit from the bank's services, the loan value he received from the bank and the period he used. Thus, those who deposit their savings to the bank as a loan have the right to get a loan from the bank. This type of credit will be interest-free and the bank will not receive any compensation for this transaction (8).

B - Function of Adding Liquidity to Partnership Certificates

One of the basic functions of the Interest-Free Bank is to issue the promissory notes of the investing institutions, prepare the promissory notes and to buy and sell the promissory notes of the companies it supports, which will provide the necessary guarantees. The bank will offer the securities of the investor company to the market, provide the necessary publicity and confidence, and accelerate capital formation by directing the people's savings to the purchase of shares. The public will also share in the profits and losses of the supported organization by purchasing shares. The bank will buy and sell the notes at the current price using a balance formula that determines the current price of the notes according to supply and demand. Since the bill is held in trust in the bank, the bank will not make any profit or loss from this function (9).

C —General Service Function

In addition to banking, surety services, accounting, promotion, introduction, advocacy, marketing, etc. It will support private and legal entities by providing general services such as: It will provide general services in partnership with the foundation, credit and mutual aid cooperative or other non-profit organizations that are the founders of the bank. Which of the general services will be provided by the founding institutions and which by the bank will be regulated by the contract. Banks and the institutions establishing the banks to provide general services to private and legal persons will help the effective conduct of economic activities. Because only large companies provide such services through various organizations they establish and at great expense. Since small companies' financial resources do not allow them to benefit from these services, it becomes impossible for them to use their economic activities effectively. For this reason, it becomes difficult for them to compete with large companies and it becomes easier for monopolistic tendencies to increase in the market. Today, villages, municipalities and other organizations established and financially supported by the state provide general services such as social and infrastructure. The high cost of the services provided in this way and the fact that they are performed in a limited area narrow the area of impact. Establishing an interest-free bank by the Credit and Solidarity Cooperative or organizations that provide general services, and jointly providing guarantee and credit services, as well as banking and other general services, will increase the economic activities of medium and small companies and accelerate the economic and social development process of our country (10).

V - CONCLUSION

We believe that the implementation of the "Interest-Free Banking Model", which has been tried to be put forward as a result of long theoretical and practical studies, will help solve the problems encountered in the economic structure today, such as unemployment, inflation and the slowdown of economic development. We declare that we will welcome any discussion and criticism that will shed light on the implementation of this model, which we believe will play a vital role in the effective functioning of the capital market and the mobilization of idle resources and capacities in our country, which has rich natural and human resources, and that universities, business circles and public institutions will pay the necessary attention to this issue. We hope. We believe that especially private and legal persons who set out with the intention of establishing an interest-free bank will show the necessary attention to the issue (11).