This paper delves into the evolving landscape of Islamic finance in Türkiye, where Participation Banks (PBs) adhere to Islamic law and ethical principles, setting them apart from Conventional Banks (CBs). The unique nature of PBs demands tailored assessments of their financial health. The primary objective is to evaluate the financial stability and credit risk of Türkiye's PBs through a comparative analysis with CBs. The study employs the Non-Performing Loans (NPL) ratio in conjunction with the Emerging Market (EM) Score model—a modified version of Altman's Z-Score which is widely used in predicting the bankruptcy of firms including banks. The combination provides a comprehensive evaluation and a deeper understanding of financial stability.

Focused on six major PBs—Kuveyt Türk, Albaraka Türk, Türkiye Finans, Ziraat, Vakıf, and Türkiye Emlak—the methodology entails collecting and analyzing financial data from official sources, including the Participant Banks Association of Turkey (TKBB) and the Banking Regulation and Supervision Agency (BRSA).

Anticipated outcomes include enhanced decision-making and the development of robust risk management strategies for Turkish PBs, reinforcing their financial stability. The comparative analysis with CBs aims to unveil competitive advantages and unique challenges, offering valuable insights for policymakers, regulators, and stakeholders in the Turkish banking sector.