Islamic banking

The last two decades have witnessed a tremendous global growth in Islamic finance and banking, mainly prompted by the global financial crisis. This growth has been accompanied by an increasing interest among researchers, policymakers, managers of financial institutions, and the public about the functionalities of the Islamic banking system and how it differs from conventional banking. Against this backdrop, we start this chapter with an overview and assessment of the practice of Islamic banking around the world. Then, we discuss its primary characteristics, including its underlying principles and common financial products. Next, we review the key findings in the empirical literature on the differences between Islamic and conventional banking at the micro and macro levels. We conclude with a discussion of avenues for future research.