Leo Indra Wardhana
Department of Economics and Business Vocational School, Gadjah Mada University

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Understanding Heterogeneity in Islamic Banking Stability: Explaining Divergent Evidence from Global Studies Dwi Swasana Ramadhan; Mamduh Mahmadah Hanafi; Leo Indra Wardhana
Journal of Islamic Economic Laws Vol. 9 No. 01 (2026): January
Publisher : Universitas Muhammadiyah Surakarta

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.23917/jisel.v9i01.17348

Abstract

Financial stability is essential for sustaining economic systems, yet empirical evidence on Islamic banking stability remains heterogeneous across studies. This study aims to provide a comprehensive understanding of Islamic banking stability by emphasizing the conditionality of previous evidence. This study applies a systematic literature review under the PRISMA framework combined with bibliometric mapping based on Scopus-indexed publications to address the ambiguity and differences surrounding the determinants of Islamic banking stability. The fin     dings reveal that the literature is dominated by panel data and dynamic estimation approaches, particularly GMM, while the Z-score remains the most frequently used stability proxy. The results also indicate that research is geographically concentrated in countries with well-developed Islamic financial systems. Furthermore, the study finds that empirical evidence on Islamic banking stability is heterogeneous, showing positive, negative, and mixed relationships depending on the choice of stability proxies, macroeconomic conditions, and research design. The findings suggest that Islamic banking stability is not inherently determined by its Islamic principles, but rather by the effectiveness of risk-sharing mechanisms within a supportive institutional and regulatory environment. This study contributes by providing a structured synthesis of fragmented literature and offers directions for future research to explore underexamined areas such as deposit contracts, Islamic window banks, and Islamic rural banks.