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Whither Islamic Banking?

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  • Mohamed Ariff

Abstract

type="main" xml:id="twec12171-abs-0001"> Islamic banking is visibly on the rise across the globe, supported by a growing clientele, both Muslim and non-Muslim, although it has yet to demonstrate that it is a viable alternative to conventional banking. Islamic banking is still under the shadow of conventional banking, not only with products that are strikingly similar to those offered by conventional banks, but also with conventional banks having a strong presence as stakeholders in the Islamic banking industry. Islamic banking is still in the early phase of a presumably long evolutionary process, apparently stuck in the initial phase of product differentiation. Islamic banks are competing with conventional banks rather than among themselves, which does not augur well for innovations and creativity, as it tends to keep them preoccupied with modifications of conventional products with Shari'ah compliance. Islamic banks have arrived at a new crossroads. They could either continue on the same path of what may be termed as ‘head-on competition’ with conventional banks or change their direction in favour of a ‘niche market’ strategy.

Suggested Citation

  • Mohamed Ariff, 2014. "Whither Islamic Banking?," The World Economy, Wiley Blackwell, vol. 37(6), pages 733-746, June.
    • Handle: RePEc:bla:worlde:v:37:y:2014:i:6:p:733-746
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    File URL: http://hdl.handle.net/10.1111/twec.2014.37.issue-6
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    Cited by:

    1. Hafiz Hoque & Heng Liu, 2023. "Impact of bank regulation on risk of Islamic and conventional banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 1025-1062, January.
    2. Mohd Amin, Syajarul Imna & Mohd, Shamsher Mohamad Ramadili & Mohd. Rasid, Mohamed Eskandar Shah, 2017. "Does Cost Efficiency Affect Liquidity Risk in Banking? Evidence from Selected OIC Countries," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 51(2), pages 47-62.
    3. Sun, Poi Hun & Mohamad, Shamsher & Ariff, M., 2017. "Determinants driving bank performance: A comparison of two types of banks in the OIC," Pacific-Basin Finance Journal, Elsevier, vol. 42(C), pages 193-203.
    4. Risfandy, Tastaftiyan & Tarazi, Amine & Trinugroho, Irwan, 2022. "Competition in dual markets: Implications for banking system stability," Global Finance Journal, Elsevier, vol. 52(C).
    5. Mansor Haji Ibrahim, 2019. "Rethinking Islamic Economics إعادة التفكير في الاقتصاد الإسلامي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 32(2), pages 119-124, January.
    6. Ibrahim, Mansor H. & Rizvi, Syed Aun R., 2018. "Bank lending, deposits and risk-taking in times of crisis: A panel analysis of Islamic and conventional banks," Emerging Markets Review, Elsevier, vol. 35(C), pages 31-47.

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