Exploring encounters and prodigies of Islamic banks in non-Muslim states: towards enhancing regulatory frameworks of Islamic banking system

Purpose The primary aim of this study is to explore challenges and prospects of Islamic banking system in non-Muslim states to foster regulatory frameworks of the system. Design/methodology/approach Content analysis as an integral part of qualitative research was used. Secondary data through the exploration of cursory literature was taken into consideration. Findings The findings identified three prime challenges, namely, regulatory, operational and institutional, which are impeding the smooth activities and performances of Islamic banks in using innovative Islamic products and services that can favourably compete with products and services of conventional banking system in non-Muslim states. In addition, strengthening the adoption and performance of Islamic banking in non-Muslim states can efficiently and effectively address the identified and multifarious regulatory, operational and institutional challenges to achieve financial inclusion and overall economic growth. Research limitations/implications Challenges encountered and prodigies or potentials of operating Islamic banking system by most of non-Muslim countries remains a pivotal aspect that needs research attention in the recent. Practical implications Nonetheless, the limitation of this study is that the study relies on the use of secondary data. However, it has provided a substantial direction for future studies in empirically exploring the variables of this study. Social implications Indeed, 19th century was a remarkable turning point in the development and expansion of Islamic banking system in the Muslim world. Many predominant Muslim countries such as Malaysia, Indonesia, Saudi Arabia, Bangladesh, Pakistan, among others have been efficiently and effectively operating Islamic banking system within the framework of Islamic legal provisions. Many non-Muslim countries such as Australia, the UK, USA, etc., have also adopted Islamic banking system. Originality/value It is noted that policy directions of the study among others should address the regulatory frameworks that is Shari’ah-compliant in the operation of Islamic banking system in non-Muslim states. It is therefore suggested that the policymakers, Islamic financial experts and regulators should use the innovation that could bring competitiveness into the operation of Islamic banking system in non-Muslim states.