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Islamic banking: Formally Shariah-compliant, functionally conventional
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Mansoor Khan 
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
Islamic banking replaces conventional interest-based mechanisms with risk-sharing and interest-free arrangements. It integrates finance with the real economy while promoting ethical conduct, transparency, and market stability. Over recent decades, it has grown rapidly to become an integrated part of global finance. However, there are growing concerns among the Muslim polity and scholars regarding the authenticity of its practices and adherence to Islamic principles. The study offers a critical evaluation of the conceptual frameworks and practical implementations of deposit and financing structures within prominent Islamic banks around the world. Comparative data and empirical analysis indicate that the returns on Islamic banking products are statistically indistinguishable from those of conventional banks. While these products comply with Shariah requirements in form, they often replicate the economic substance of interest-based instruments. The findings point to an urgent need for structural reforms to promote genuinely risk-sharing, asset-based, and authentically Islamic banking practices.
Keywords: Asset-Based Financing, Ethical Investment, Ijarhah, Mudarabah, Musharkah, Murabahah, Risk-Sharing Mechanisms, Qard Al-Hasan, Shariah Supervisory Board, Tawarruq
Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.
Declaration of conflicting interests: The Author declares that there is no conflict of interest.
JEL Classification: F0, G2, G3, M21
Received: 14.02.2025
Revised: 21.04.2025; 28.05.2025; 14.11.2025
Accepted: 04.12.2025
Published online: 08.12.2025
How to cite this paper: Khan, M. (2025). Islamic banking: Formally Shariah-compliant, functionally conventional. Corporate Ownership & Control, 22(4), 78–88. https://doi.org/10.22495/cocv22i4art7
