Exploring Islamic and Conventional Financial Banking Development and Economic Growth: A Systematic Review

This study presents a systematic review examining the impact of Islamic and conventional financial banking development on economic growth by combining points of contention and refutations from the relevant scientific literature. While Islamic banking operates on principles that prohibit interest and emphasize risk-sharing, conventional banking relies on interest-based transactions. Through a comprehensive search strategy, this review integrates empirical studies, theoretical frameworks, and meta-analyses to analyze the nexus between banking development and economic growth. The findings reveal nuanced relationships, with Islamic banking potentially stimulating economic activity through ethical practices and risk-sharing mechanisms, although empirical evidence on its direct impact remains mixed. Conversely, conventional banking, historically associated with rapid credit expansion and economic growth, raises concerns regarding financial stability and inclusivity. Notably, there is a limited number of articles exploring the impact of Islamic and conventional financial banking development on economic growth. Therefore, our research aims to fill this gap by providing insights into the unexplored potential and distinctive challenges within this context across various sectors. The comprehensive search of publications was conducted from 2020 to 2024, and 16 relevant articles were selected for inclusion and in-depth analysis within our review. These studies, published in the last 5 years, encompass diverse sectors and contexts, with the review primarily focusing on uncovering the challenges associated with Islamic and conventional financial banking development on economic growth. A systematic review of the literature was conducted from 2020 to 2024, analyzing 16 studies selected through database searches and keyword searches related to Islamic and conventional financial banking impacts on economic growth. This study is intended to serve as a valuable resource for researchers in this field, emphasizing the importance of evidence-based policymaking to leverage synergies between banking systems, thereby promoting sustainable development and financial resilience.