Structural and Legal Diversity in Islamic Banking Systems Across Islamic Countries

Abstract

This study explores the structural and legal diversity of Islamic banking systems across selected Islamic countries. While Islamic banking is founded on shared Shariah principles – such as the prohibition of interest (riba) and the emphasis on risk-sharing – there exists substantial variation in how these principles are implemented across jurisdictions. By combining qualitative legal analysis with quantitative financial data, the research identifies key differences in regulatory frameworks, institutional structures, and financial performance. Using cluster analysis, we group countries based on selected financial ratios (e.g., capital adequacy, liquidity, profitability, and asset quality) to highlight patterns and divergences. The findings contribute to a deeper understanding of the heterogeneity within the Islamic finance landscape and provide insights for policymakers, investors, and scholars seeking to navigate or reform these systems.