This study aims to determine the effect of Islamic banking on economic growth in Turkey by comparing it
with conventional banking. In the study, the quarterly time series covering the period 2005Q4 to 2018Q4 and the
Autoregressive Distributed Lag Model (ARDL) developed by Pesaran, Shin and Smith (2001) are used. According to
the estimated long-run coefficients from ARDL model, the elasticity of the GDP with respect to the conventional
banking credit and Islamic banking credit is equal to 0.106 % and 0.016 %, respectively. The estimates of the model
confirm that conventional banks provide more contribution than Islamic banks to economic growth in Turkey.
However, Islamic banking has still a very small part of the financial system in Turkey.Therefore, the development and
encouragementof more Islamic financial instruments can strengthen relationship between Islamic finance and
economic growth while increasing the share of Islamic finance in the financial system.