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There is almost a consensus amongst Muslim scholars that the most crucial problem faced by the Muslim world is in the prevailing ideas (including sanctification, archaism, the common paradigm, the absence of the role of the intellectual, etc.) which formulate people’s thoughts and determine their options. There will not be a genuine renaissance of Islam without updating these ideas and emerging from the cocoon of the past. This can be done through a modern approach which would respond to the changes by looking towards the future rather than towards the past. This study aims to identify the intellectual aspects of this crisis and how this crisis has formed and influenced Islamic banking.

To analyse this crisis, the methodology called causal layered analysis (CLA) is used, which is drawn from the field of strategic foresight and designed by Inayatullah (2002). CLA is designed on the basis that the way to understand the nature of the problem will determine the proposed solutions, by diving through the surface phenomena of the problem to the depth of the “motors” of the crisis.

The author finds that Islamic banking is the offspring of its incubator ideas and reform, and the change and progress of Islamic banking can only deal with a critical approach of these ideas; Islamic banking promotes itself as an alternative to conventional banking, but this has not been achieved except on the level of form rather than substance; Islamic banking is a movement within a variable reality, and inertia in specific form and context will keep it in a state of crisis and may lead to its demise.

To the author’s knowledge, this is the first study showing the roots of the ideas making up the fabric of banking in the Muslim world and the repercussions of intellectual crisis on Islamic banking.

This paper seeks to use empirical evidence to examine the role of Islamic banks' financing on economic performance of selected countries (Malaysia, Indonesia, Bahrain, UAE, Saudi Arabia, Egypt, Kuwait, Qatar and Yemen).

Using quarterly data (2000:1‐2010:4), this paper utilizes the panel cointegration approach models framework.

The results generally signify that, in the long run, Islamic banks' financing is positive and significantly correlated with economic growth and capital accumulation in these countries. The results obtained from the Granger causality test reveal a positive and statistically significant relationship between economic growth and Islamic banks' financing in the short run and in the long run. It also found that the long run relationship is stronger than the short run relationship.

This paper uses empirical evidence to show the effect of Islamic banks' financing on economic growth of selected Islamic countries. To the best of the authors' knowledge, most of the studies in this field have applied the bound testing approach of cointegration, error correction models (ECMs), Auto Regressive Distributed lag (ARDL) and Vector Autoregressive Model (VAR), and the coefficients obtained by these models cannot be deemed as a general finding applicable for other countries. The superiority of this article is in applying the FMOLS model, which has stable and consistent coefficients and is also a dynamic model.