Finance and development in Muslim economies.

The recent trend in the Muslim world towards reinforcing their cultural (i.e., religious) values on their economic policies and institutions has resulted in a roughly $2 trillion Islamic financial services industry. This industry is quite resilient and growing at a large rate even at a time when conventional banks were failing in the recent financial crisis. Financial systems play a vital role in advancing intermediation by mitigating market frictions, facilitating efficient investment decisions, allocating scarce capital and conveying financial transactions. This, in turn, stimulates capital accumulation decisions and technological innovation that are crucial in delineating a nation’s long-term economic path. A conference was held in Bangor University, Gwynedd, North Wales on September 15, 2014, to critically examine the Islamic financial services industry under the aegis of Bangor University and the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank. The four high-quality papers presented at the conference are featured in this Special Issue of the Journal of Financial Services Research (JFSR). They are categorized into two groups. The first group comprises of a paper studying moral obligations and a firm’s engagement in ethical activities. The remaining three papers study the risk of Islamic banks vis-à-vis conventional banks. These are described below