The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Islamic finance has started to grow in international finance across the globe, with some
concentration in few countries. Nearly 20 percent annual growth of Islamic finance in recent
years seems to point to its resilience and broad appeal, partly owing to principles that govern
Islamic financial activities, including equity, participation, and ownership. In theory, Islamic
finance is resilient to shocks because of its emphasis on risk sharing, limits on excessive risk
taking, and strong link to real activities. Empirical evidence on the stability of Islamic banks,
however, is so far mixed. While these banks face similar risks as conventional banks do, they
are also exposed to idiosyncratic risks, necessitating a tailoring of current risk management
practices. The macroeconomic policy implications of the rapid expansion of Islamic finance
are far reaching and need careful considerations.