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The main objective of this paper is to highlight the main features of interest‐free banking theory and practice in Pakistan over the last three decades. It explores the country‐wide interest‐free banking movement since its inception in 1980 to its demise in 2002, and the reasons for such outcome. Moreover, it addresses the question why interest‐free banking has been recently reinstated by the government of Pakistan under the dual banking system and more importantly, would it be any real and big success?

The paper explores concepts, model, strategies and practical issues related with the Islamic banking and finance system. It holds a conceptual approach. It is designed as a case study that provides comprehensive analysis over the contributions made by political, government, financial, legislative and religious institutions of Pakistan in setting‐up the interest‐free banking and finance system in the country.

The findings of the paper hold that all intellectual, practical, institutional, political, constitutional and regulatory measures undertaken by the government and top policy makers of Pakistan to transform the banking system of the country Shariah compliant were devoid of real urge and effectiveness, only piecemeal solutions. The interest institution got very firm roots in the financial sector of Pakistan and strongly supported by other exploitative agents and systems that prevail in the socio‐economic life of the country. There is a dire need to take revolutionary steps with strong political and public support and commitment to uproot interest along with its allies from Pakistan economy and society. After all, Pakistan is an ideologically‐based Muslim country that holds the constitutional responsibility to eliminate interest from its economy and establish a fair and just socio‐economic order.

The paper envisages the main concepts, models and strategies adopted in implementing the Islamic economic and finance system in Pakistan. However, it does not deal in quantitative data and statistical tools to support its findings by empirical evidence. Rather it entails subjective analysis and critique work.

The paper provides the deeper insight of highly technical, complex and mammoth job of eradicating interest from Pakistan economy that was deeply rooted and also strongly supported by other exploitative forces prevailing in the socio‐economic life of the country, causing gross distribution of wealth and concentration of resources and powers in the hands of few. It explains that the need for a major change in one institution or system entails the demand for bringing radical changes in the whole set‐up of country. This paper undertakes longitudinal view to analyze the institutional, financial, judicial and political developments that took place in Pakistan to restructure its economy on Islamic lines. It lays down all relevant facts and issues systematically to provide a clear‐cut assessment over the past, present and future of interest‐free banking movement in Pakistan.

The main objective of this paper is to highlight the unprecedented growth of Islamic banking and finance in the contemporary finance world. It captures the advancements of Islamic banking and finance industry across the tools, systems, sectors, markets and over 75 countries from Africa, Asia, Europe and North America.

The paper deals with the paradigm of Islamic banking and finance. It constitutes a general review that bears special features, facts and figures over the recent developments of Islamic banking and finance across the globe. It takes stock of the growing institutional and infrastructure support for the Islamic banking and finance system in Muslim countries and Western financial markets.

The findings of the paper hold that Islamic banking and finance industry has been making breakthrough improvements to become a truly viable and competitive alternative to conventional systems at the global level. Islamic banking and finance institutions have acquired booming grounds in the Middle East, South East and South East Asia. These growing Islamic hubs have been acting as a launching pad to promote Islamic banking in Western business and financial markets. There are some core factors contributing to the recent success of Islamic banking and finance, such as spiraling oil prices worldwide, prolonged boom in the Middle Eastern economies, product innovation and sophistication, increasingly receptive attitude of conventional regulators and information technology advancements that have been acting as a catalyst for the Islamic banking and finance industry to go global. Given all growth patterns, Islamic banking may be able to win over the majority of customers from the Muslim world that constitutes almost 24 per cent of the world's population (over 1.3 billion), and other ethical groups across the globe in times ahead.

The paper takes stock of on‐going developments in Islamic banking and finance industry worldwide. It deals with latest information, facts and figures, which however do not amount to a substantive volume to allow statistical testing and analysis to figure out the main factors and their actual contributions in making Islamic banking and finance emerge as the fastest growing industry of the global finance. This paper mostly bears a subjective outlook.

The paper aims to attract the global attention towards the fastest growing industry of the contemporary world of finance. It presents the case of the Islamic banking and finance industry in the most powerful, comprehensive and logical fashions to remove all misgivings about it in some circles, and let it be seen as an industry adding more ethical, competitive, flexible and diversified tools and systems to global financial markets. The paper highlights the increasing moral and material support that Islamic banking has been enjoying from Muslim governments and the public, and Western market players and regulators. It draws attention towards the growing number of products, systems, infrastructures and supporting institutions of Islamic banking over the recent years. The current trends of Islamic banking industry worldwide captured in this paper can tell all about its strength and weakness, future prospects and ambitions to become a truly innovative, competitive and integrated part of contemporary global finance.

The core objective of this paper is to direct worldwide attention towards the unparalleled development in Islamic banking, its infrastructures and supporting institutions in recent years. This paper articulates the case for Islamic banking in a very comprehensive and effective manner. It depicts Islamic banking as a growing discipline adding more ethical, competitive and diversified tools and systems into global finance. It highlights the paradigm, theory and practice, achievements, pitfalls and future prospects of Islamic banking.

The paper deals with the Islamic paradigm of borrowing, lending and investment. It presents the conceptual model and practice of Islamic banking. It covers other related issues over the recent development of Islamic banking across the globe.

The paper observes that Islamic banking has made unprecedented progress over recent years. The Middle East, South Asia and the Indian Subcontinent have emerged as hubs of Islamic banking. Western conventional regulators and investors and other agents have also shown a greater interest in and a receptive attitude towards Islamic banking. Despite all this, Islamic banking has been facing some core problems and challenges that will have deep impacts on its future growth and development.

The paper deals with concepts, information and other facts on Islamic banking that are not supported by any statistical analysis and empirical evidence. Thus this paper may be regarded as being subjective in its real essence.

The paper educates Western market players about Islamic banking tools and systems in their own language so as to bridge the gap between conventional and Islamic banking disciplines. It suggests that Islamic banking is an equity‐based system with conventional features. It makes an important point – that the main players from both the Islamic and conventional streams have a good opportunity to pool their expertise and resources to come up with better solutions in business, investment and finance.

The purpose of this paper is to focus on various modes of Islamic finance and examines their risk and other characteristics by conducting a selective literature review.

Due to the Islamic prohibition of interest and in compliance with injunctions on permissible trade contracts, the savings and investment contracts offered by Islamic banks have a different risk profile than those of conventional banks. This gives rise to a number of regulatory issues pertaining to capital adequacy and liquidity requirements. Operational issues also arise as Islamic banks are limited in their choice of risk and liquidity management tools such as derivatives, options and bonds. All these issues are theoretically examined and various performance indicators of two Islamic banks are also examined to compare them with traditional banks that practice mark up pricing.

The balance sheets and various performance indicators show that there is evidence that Islamic banks in Pakistan tend to engage in little long‐term project financing. However, on the plus side these banks have shown good performance with respect to the returns on their assets and equity and have also demonstrated better risk management and maintained adequate liquidity.

A larger set of banks across various countries needs to be examined before any substantive conclusions can be reached about the relative performance of Islamic versus conventional banks.

These largely pertain to central bank prudential regulations which must ensure that a level playing field is created for Islamic banks to compete with traditional banks.

The paper is a commentary on the risk characteristics of Islamic banks and also analyzes for the first time the performance of the only two purely Islamic banks currently operating in Pakistan.

The purpose of this paper is to formalize a general equilibrium circular causation relationship model in the Islamic economic framework between wealth tax (Zakat), Islamic bank and the real economy.

Mathematical modeling along with explanation.

The integrative interrelationships can be formalized only under the assumption of unity of knowledge as derived from the foundation of oneness of the divine law (shari’ah) according to the Qur’an, Prophetic traditions (Sunnah) and social discourse.

A future work would be to empirically estimate the general equilibrium model.

A guidance to Islamic banks on the constructive utilization of Zakat fund for productive transformation in the real economy.

A general equilibrium model guided by the episteme of oneness of the divine law at work, hence unity of knowledge at work in real problems of ethics and economics according to the Islamic worldview.

The purpose of this paper is to theoretically describe the role of Zakah as a vital tool of fiscal policy in achieving Pareto optimality.

The paper sets a general equilibrium model that describes the long‐run convergence to a Pareto optimal allocation in a theoretical Islamic economy. The model is based on Diamond criteria where the social planner maximizes the utility of all generations subject to the output of the economy.

While the government in the capitalist economy issues debt like T‐bills and government bonds to insure Pareto optimality, the paper shows, theoretically, that constructing a Zakah fund can take the role of issuing debt in financial markets. Furthermore, the paper shows that Islamic economy converges to Pareto optimality by its nature without issuing debt in the financial market.

This result is very important in describing the strength of the theoretical Islamic economics in achieving dynamic efficiency with least possible interventions. More importantly, the results would help the government in setting an optimal tax rate that insures Pareto efficiency without issuing debt.

This paper attempts to model the actual effects of Zakah as a fiscal policy tool in wealth redistribution in an Islamic economy. In addition, the paper opens a wide channel for future research in conducting monetary and fiscal policy in a government's debt tools economies.

The purpose of this paper is to examine the direct and indirect moderation effects of demographic and socio-economic(s) factors on the adoption of Islamic banking in UAE.

Convenience sampling was done on the residents of Sharjah, Dubai, and Abu Dhabi. A closed-ended questionnaire with 30 items was designed and pre-tested before the start of the study. Path analysis and moderation testing were the main analytical approach. A total of 320 respondents completed the survey.

The research revealed that demographic and socio-economic(s) moderators may have direct and indirect moderation effects on the adoption of the Islamic banking in the UAE, which indicates the importance of these factors in the provision of Islamic banking products and services in the UAE.

This study further revealed that these moderators have huge practical implications for Islamic bank managers and marketers as they can exploit these demographics to enhance their market share in the UAE.

In UAE, minimal attention has been directed toward the role moderators would play in the criterion that individual investors would use in the adoption of Islamic banking products and services in a cosmopolitan environment that is experiencing competition from conventional banks.

An extensive review of the existing literature on the adoption of Islamic banking reveals that no empirical research has been undertaken to explore the role played by demographic and socio-economic(s) moderators in the adoption of Islamic banking in UAE and internationally. This study attempts to fill this gap.

The purpose of this paper is to develop a methodology to study profit vs non‐profit seeking firms usefully to compare corporate performance. It aims to apply the methodology to measure if state vs non‐state firms with different objectives are comparable in performance. If relevant, the paper also aims to comment on the applicability of this method to analysis of other firms, e.g. Islamic banks in Indonesia.

The paper applies Malmquist data envelopment analysis method to different classes of firms: state vs non‐state firms; aggregated at the industry and at national levels; and develop appropriate time trend analysis as well. Findings – The common belief that all state firms are inefficient is not upheld by test results: in some sectors (agriculture and chemicals) state firms are more efficient than private firms. Efficiency is very low, but did improve over time across all sectors and types of firms particularly before the 1997‐1998 and in recent years. Efficiency is mostly achieved through technology adoption (technological change) accounts for most efficiency gains.

This study overturns findings of many accounting performance based studies and revisits policy implications.

No one policy fits all in Indonesia for privatization programme.

The paper provides more valid methodology to compare state firms with non‐state firms for the first time.

The purpose of this paper is to study the differences or variance in the yields of Islamic and conventional bank deposits and capital, respectively, in view of their contractual differences, namely the former which is based on equity and the latter on debt.

The paper uses a financial ratio approach.

It was found that deposit yields in conventional banks were lower than return on equity (ROE), which truly reflect the contractual differences between fixed deposit and bank's capital. Also, it was found that Islamic banks' deposit yield and ROEs do not reflect their risk‐taking properties, as their variances were found to be smaller.

The paper adds to the literature on risk‐return relationship in Islamic capital theory, which currently lacks theoretical studies.

The paper shows that increasing the level of risk taking in mudarabah investment account could increase its expected returns.

Since both shareholders' capital and mudarabah investment accounts constitute risk capital, variance in yields should be proportional to risk. The paper is the first attempt to explore and compare yields from Islamic bank capital and mudarabah deposits.