The present article compares Islamic banks with interest‐based banks to measure their profitability. It also investigates what Islamic funding and investments are used by Islamic banks. Our results from this Turkish sample showed that interest‐free banks did have positive and reasonably strong rates of profitability, though their level of profitability was somewhat less than that of traditional banks, contrary to our initial prediction. Nevertheless, our results provide support for the view that interest‐free banks, based on Islamic principles, are a viable option, compared with traditional capitalist banks that derive a large portion of their profits from interest charges.