This study aims to investigate the functioning of the credit channel as an alternative to the interest channel in the Turkish economy's monetary transmission mechanism. It examines the contribution of traditional banking and participation banking to the real economy. Unlike previous studies, it compares types of banks in the financial system. Therefore, the study seeks to determine the role of traditional and participation banking in the credit channel of the monetary transmission mechanism. Using the ARDL Bounds Test, it analyzes the cointegration relationship between loan volumes, exchange rates, economic growth, and inflation from 2005:01 to 2022:04. The results show that both participation and traditional banks loans, as well as the TL/Dollar exchange rate, have a long-term effect on economic growth. The total loan volumes of both types of banks positively impact economic growth. These findings indicate that the credit channel functioning effectively in both participation and traditional banking systems.