Partnership is considered as the essence of Islamic banking. Therefore, Islamic banks are supposed to rely on the partnership contracts for acceptance of deposits and investment of funds. In practice, Islamic banks adopt partnership contracts for accepting deposits. However, these are rarely used while investing. All over the world, Islamic banks rely heavily on non-partnership contracts for investment of funds. The present paper provides a critical review of the extant literature on the rare use of partnership contracts by Islamic banks for investment purposes. This review highlights the contributions that extant literature has made to the current knowledge about the constraints in the application of partnership contracts in Islamic banks. From this review, concentrations of research efforts are identified and directions for future research are proposed.

Participatory financing schemes, including Musharakah and Mudarabah, are theoretically claimed to be the ideal modes of Islamic financing, but their practice is restrained by several factors. That is why Islamic banks have a consistent tendency to avoid participatory financing on the assets side throughout the world. However, recently this trend has started changing in Pakistan and Indonesia where the share of participatory finance has raised significantly in the financing portfolio of Islamic banks. The present paper explores this recent spur of participatory finance in Pakistan in terms of its domains of applications and the responsible factors. The findings lead to a novel posteriori framework which shows that the shift towards participatory financing is primarily characterized by increase in working capital financing and commodity operations financing through Musharakah mode Islamic banks. Moreover, five factors contribute to the spur of participatory financing including: (i) introducing varieties in Musharakah, (ii) enhanced applicability, (iii) high volume projects, (iv) government interventions, and (v) regulator’s role. The framework can significantly advance understanding with respect to the implementation theory of participation financing within Islamic banking and related Shariah compliance and regulation.

Partici patory financing arrangements including Musharakah and Mudarabah are the essence of Islamic banking and represent the true spirit of Islamic banking and finance. Therefore, Islamic banks are expected to allow and promote partici patory financing. In practice, they do not adopt partici patory financing on the assets side due to several constraints. By far, the non-partici patory financing arrangements, particularly Murabahah and Ijarah, are the most dominant modes of financing around the globe. Many authors have provided different explanations for the tendency of Islamic banks to avoid partici patory financing. However, literature is divergent and the typology of the constraints to partici patory financing is missing. Therefore, there is no unified understanding of the constraints to partici patory financing. The present study employs insights form the extant literature using a systematic literature review and synthesizes a coherent partici patory financing constraints framework using the thematic synthesis method to name and make sense of what makes partici patory financing a less attractive option for Islamic banks. This study adds to the Islamic banking and finance literature by synthesizing the divergent literature, and conceptualizing a partici patory financing constraints framework which can be used as a dependable framework for assessment in any related case study and policy implications. Moreover, it demonstrates an application of systematic review in Islamic banking research.

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The extant literature describes and justifies stakeholders' wellbeing as the essence of Islamic Banking and Finance (IBF). This infers the compulsion on Islamic banks to devise their operations based on inclusive wellbeing, and a greater perspective from the Maqasid al Shariah framework, and not merely converging on the compliance rulings. This paper presents a review and analysis of the present literature on Maqasid al Shariah and Stakeholders' wellbeing and synthesizes a framework for gauging the theoretical association between the classical Maqasid al Shariah and Stakeholders' wellbeing. The proposed framework can be used as a dependable framework for policy implication and future research in IBF. Moreover, concentrations of research efforts are identified from the present review and directions for future research are proposed.