Abstract

Purpose: Islamic Finance has emerged as a significant tool for financial development, with a 12% annual increase. It is regarded as a prominent component in achieving financial stability, grounded in the concepts of risk-sharing and profit-sharing. With its rapid expansion, previous research has sought to ascertain its impact on financial stability. However, there has been considerable uncertainty regarding which areas or concepts warrant further focus. This review responds to gaps left by Belouafi et al., (2015) and others, offering a comprehensive synthesis of recent studies (2016–2023) to re-evaluate Islamic finance's contribution to financial stability.
Research Design: The authors conduct an in-depth analysis of existing journals to create a systematic review of Islamic finance and its impact on financial stability, with a focus on studies published from 2016 to 2023.

Keywords

Islamic Finance; Islamic Banking; Financial Stability; Z score; Profitability; Liquidity Risk.