Conceptualizing and examining the critical success factors for implementing Islamic banking system towards banking sector of Iran: A mixed method approach

Document Type : Research Paper


1 Faculty of Management, University of Tehran, Tehran, Iran

2 Professor of Finance, Faculty of Management, University of Tehran, Iran

3 Assistant Professor of Management, EDC member and Visiting Professor at University of Tehran, Iran


Islamic banking, as a major center for financial transactions in Islamic societies,
plays a key role in the development of Islamic economics. The fundamental essence
of Islamic banking system is based on the fact that although, Islam has forbidden the
interest in transactions, but trade and profit is encouraged and supported. The actual
implementation of the Islamic banking system due to its unique features can be the
source of many benefits and advantages for Islamic countries; and it is more
significant when we recognize that the banking sector is the largest body of Iranian
service sector of economy. However, a significant proportion of the banking system
has been Islamized in Iran. Therefore, this study seeks to use empirical evidence to
conceptualize and examine the critical success factors for the implementation of
Islamic banking system in the banking sector of Iran. To achieve this purpose using
mixed method approach, the research framework has been designed and examined.
The required data in the qualitative part of the study were collected after detailed
literature review and research background- through in-depth interviews with
banking executives and academic experts; then the quantitative part of the study for
framework examination was conducted using survey. Based on this study's findings,
the fitted model of critical success factors (CSFs) for successful implementation of
Islamic banking in the banking sector of Iran is proposed. Finally, both applied and
theoretical recommendations and directions are shown in this study.


Main Subjects

Aghaei, L. & Monavvarian, A. (2010). "Recognizing critical success factors
(CSF) to achieve the strategic goals of SAIPA Press". Business
Strategy Series, 11(2), 124-133.
Ahmad, K. (2000). "Islamic finance and banking: the challenge and
prospects". Review of Islamic economics, 9, 57-82.
Ainley, M.; Mashayekhi, A.; Hicks, R.; Rahman, A. & Ravalia, A. (2007).
Islamic Finance in the UK: Regulation and Challenges. Financial
Services Authority (FSA).
Akbar, S.; Shah, S.A. & Kalmadi, S. (2012). "An investigation of user
perceptions of Islamic banking practices in the United Kingdom".
International Journal of Islamic and Middle Eastern Finance and
Management, 5(4), 353-370.
Alazmi, M. & Zairi, M. (2003). "Knowledge management critical success
factors". Total Quality Management, 14(2), 199-204.
Amirzadeh, R. & Shoorvarzy, M.R. (2013). "Prioritizing service quality
factors in Iranian Islamic banking using a fuzzy approach".
International Journal of Islamic and Middle Eastern Finance and
Management, 6(1), 64-78.
Babajani, J. & Shakarkhah, J. (2012). "Appropriate accounting model for
Islamic banking in Iran with focus on participative contracts".
Quarterly Journal of Stock Exchange, 5(17), 163-192.
Bazargan, A. (2008). An introduction to qualitative and mixed research
methods: commonly used approaches in the behavioral sciences.
Tehran: Didar Publication.
Beck, T; Demirguc-Kunt, A. & Merrouche, O. (2013). "Islamic vs.
conventional banking: Business model, efficiency and stability".
Journal of Banking & Finance, 37(2), 433-447.
Benamraoui, A. (2008). "Islamic banking: the case of Algeria". International
Journal of Islamic and Middle Eastern Finance and Management,
1(2), 113-131.
Busler, M. (2011). "The financial crisis: Western banking versus Islamic
banking". World Journal of Entrepreneurship, Management and
Sustainable Development, 7(1), 1-16.
Chapra, M.U. (1985). Towards a Just Monetary System. Leicester: The
Islamic Foundation.
Cooke-Davies, T. (2002). "The real success factors on projects".
International Journal of Project Management, 20(1), 185–190.
Eivazlou, H. (2007). "Islamic banking system in Iran". Export Development, 
10(65), 2-3.
Eivazlou, H. & Meysami, H. (2008). "Theoretical study of the stability and
performance of Islamic banking compared with conventional
banking". Islamic Economics Quarterly, 7(31), 161-190.
Estiri, M.; Hosseini, F.; Yazdani, H. & Javidan-Nejad, H. (2011).
"Determinants of customer satisfaction in Islamic banking: evidence
from Iran". International Journal of Islamic and Middle Eastern
Finance and Management, 4(4), 295-307.
Fakiyesi, T. (2011). Islamic banking and the Nigerian financial system.
Presented at the Round-Table Workshop at Nigeria Institute of
Advanced Legal Studies, University of Lagos.
Farahanifard, S.; Nazarpour, M. & Baei, S. (2012). "Comparative study of
Islamic and non-Islamic banks’ efficiency: case study of 2007-2009
economic crises". Quarterly Journal of Islamic Economics, 12(46),
Farzin, M.R.; Safari, M.; Hesan, M. & Khalouei, A. (2014). "A survey of
Critical Success Factors for Strategic Knowledge Management
implementation: applications for Service Sector". Procedia - Social
and Behavioral Sciences, 109, 595-599.
Fasih, F. (2012). "Inclusive growth in India through Islamic banking".
Procedia-Social and Behavioral Sciences Journal, 37, 97-110.
Forouzandeh, S. & Ahmadi, P. (2010). "Maintaining customer loyalty in a
de-regulating service industry". International Bulletin of Business
Administration, 8, 35-47.
Furqani, H. & Mulyany, R. (2009). "Islamic banking and economic growth:
empirical evidence from Malaysia". Journal of Economic Cooperation
and Development, 30(2), 59-74.
Gerrard, P. & Cunningham, J.B. (1997). "Islamic banking: a study in
Singapore". International Journal of Bank Marketing, 15(6), 204-216.
Gudarzi Farahani, Y. & Dastan, M. (2013). "Analysis of Islamic banks’
financing and economic growth: a panel co-integration approach".
International Journal of Islamic and Middle Eastern Finance and
Management, 6(2), 156-172.
Gudiene, N.; Banaitis, A.; Banaitiene, N. & Lopes, J. (2013). "Development
of a Conceptual Critical Success Factors Model for Construction
Projects: a Case of Lithuania". Procedia Engineering, 57, 392-397.
Gudiene, N.; Banaitis, A. & Banaitiene, N. (2013). "Evaluation of critical
success factors for construction projects - an empirical study in
Lithuania". International Journal of Strategic Property Management,
17(1), 21-30.
Hamza, H. (2013). "Sharia governance in Islamic banks: effectiveness and
supervision model". International Journal of Islamic and Middle
Eastern Finance and Management, 6(3), 226-237.
Hassan, K.M. & Lewis M.K. (2007). Handbook of Islamic Banking.
Cheltenham (UK): Edward Elgar Publishing Limited.
Hosseini, M.H. & Hosseini, V.S. (2013). "The Impact of Co-Production on
Customer Loyalty in Banking Services: A Case of Saman Bank".
Iranian Journal of Management Studies, 6(2), 105-129.
Huang, L. & Lai, C. (2012). "An investigation on critical success factors for
knowledge management using structural equation modeling".
Procedia-Social and Behavioral Sciences, 40, 24-30.
Ika, L. A. (2009). "Project success as a topic in project management
journals". Project Management Journal, 40(4), 6–19.
Ika, L. A.; Diallo, A. & Thuillier, D. (2012). "Critical success factors for
World Bank projects: An empirical investigation". International
Journal of Project Management, 30, 105-116.
Iqbal, Z. (2007). "Challenges Facing Islamic Financial Industry". Journal of
Islamic Economics, Banking and Finance, 3(1), 1-14.
Iqbal, Z. & Mirakhor, A. (1999). "Progress and Challenges of Islamic
Banking". Thunderbird International Business Review, 41(4/5), 381-
Iravani, M.J.; Ghazali, A. & Ghazali, A. (2012). "Prioritize the banking
facilities based on Islamic contracts using policy making approach".
Financial-Islamic Researches Journal, 2(2). 161-193.
Jabaly, R.; Al-Ameri, S. & Ghoul, W.A. (2013). "Islamic Banks’ Marketing
and Communication Tactics: Towards a Better Reception and
Perception". Journal of Islamic Economics, Banking and Finance,
9(3), 149-176.
Jaccard, J. & Wan, C. K. (1996). LISREL approaches to interaction effects
in multiple regressions. Thousand Oaks, CA: Sage Publications.
Jugdev, K. & Muller, R. (2005). "A retrospective look at our evolving
understanding of project success". Project Management Journal,
36(4), 19-31.
Kamarulzaman, Y. & Madun, A. (2013). "Marketing Islamic banking
products: Malaysian perspective". Business Strategy Series, 14(2/3),
Karbhari, Y.; Naser, K. & Shahin, Z. (2004). "Problems and Challenges
Facing the Islamic Banking System in the West: The Case of the UK".
Thunderbird International Business Review, 46(5), 521–543.
Karim, B.A.; Lee, W.S.; Karim, Z.A. & Jaisa, M. (2012). "The Impact of
Subprime Mortgage Crisis on Islamic Banking and Islamic Stock
Market". Procedia-Social and Behavioral Sciences Journal, 65, 668-
Marsh, H. W., Balla, J. R., & Hau, K. T. (1996). An evaluation of
incremental fit indexes: A clarification of mathematical and empirical
properties. In G. A. Marcoulides & R. E. Schumacker (Eds.),
Advanced structural equation modeling techniques (pp.315-353.
Mahwah , NJ : Lawrence Erlbaum.
Mat Rahim, S.R. & Zakaria, R.H. (2013). "Comparison on Stability between
Islamic and Conventional Banks in Malaysia". Journal of Islamic
Economics, Banking and Finance, 9(3), 131-149.
Mehregan, M. R.; Jamporazmey, M.; Hosseinzadeh, M. & Kazemia, A.
(2012). "An integrated approach of critical success factors (CSFs) and
grey relational analysis for ranking KM systems". Procedia-Social
and Behavioral Sciences, 41, 402-409.
Mirakhor, A. (2007). "Islamic Finance and Globalization: A Convergence?".
Journal of Islamic Economics, Banking and Finance, 3(2), 11-72.
Mosakhani, M. & Jamporazmey, M. (2010). "Introduce Critical Success
Factors (CSFs) of E-learning for Evaluating E-learning
Implementation Success". International Conference on Educational
and Information Technology, 224-228.
Mousavian, S.A. (2006). "New Model of Interest Free Banking". Quarterly
Journal of Islamic Economics, 6(3), 13-50.
Pinto, J. K. & Slevin, D. P. (1988). "Critical success factors across the
project life cycle". Project Management Journal, 19(3), 67-74.
Ranjan, J. & Bhatnagar, V. (2008). "Critical success factors for
implementing CRM using data mining". Journal of Knowledge
Management Practice, 9(3), 18-25.
Rashid, M.; Hassan, M.K. & Ahmad, A.U.F. (2009). "Quality perception of
the customers towards domestic Islamic banks in Bangladesh".
Journal of Islamic Economics, Banking and Finance, 5(1), 109-32.
Rathi, A.A. (2011). Banking: past, present and future. Tehran: Karvar
Safari, M. & Safari, Z. (2012). "An Empirical Analysis to Design Enhanced
Customer Lifetime Value Based on Customer Loyalty: Evidences
from Iranian Banking Sector". Iranian Journal of Management
Studies, 5(2), 145-167.
Safari, M.; Mirmhdi, S.M. & Eram, A. (2013). "Investigating the critical
success factors of corporate social responsibility implementation: 
evidence from the Iranian banking sector". Corporate Governance,
13(2), 184-197.
Saini, Y.; Bick, G. & Abdulla, L. (2011). "Consumer awareness and usage of
Islamic Banking products in South Africa". South African Journal of
Economic and Management Sciences, 14(3), 298-313.
Samuelsson, Jan. (2000) Islamisk ekonomi. Lund: Student litteratur. In:
Pervez, A. (2011). Principles of Islamic Interest Free Banking in
Pakistan: Study focusing on three Islamic Banks in Pakistan. Master
Thesis in Business Administration.
Shah, S.F.; Raza, M.W. & Khurshid, M.R. (2012). "Islamic banking
controversies and challenges". Interdisciplinary Journal of
Contemporary Research in Business, 3(10), 1018-1026.
Shaikh, S.A. (2013). "Islamic Banking in Pakistan: A Critical Analysis".
Journal of Islamic Economics, Banking and Finance, 9(2), 45-62.
Siahkarzadeh, M.S. & Mohammadi, M. (2012). "The validation of Islamic
banking system: necessity, status and requirements". Financial-
Islamic Researches Journal, 2(2), 115-141.
Siddiqi, M.N. (2006). "Islamic banking and finance in theory and practice: a
survey of state of the art". Islamic Economic Studies, 13(2), 1-48.
Sole, J. (2008). "Introducing Islamic Banks into Conventional Banking
Systems". Journal of Islamic Economics, Banking and Finance, 4(2),
Talebi, M. & Kiaei, H. (2012). "Rooting challenges of participation contracts
in the banking system of the Islamic Republic of Iran". Financial-
Islamic Researches Journal, 2(2), 37-55.
Tseng, M. L. (2011). "Using a hybrid MCDM model to evaluate firm
environmental knowledge management in uncertainty". Applied Soft
Computing, 11(1), 1340-1352.
Wilson, R. (2000). "Challenges and Opportunities for Islamic Banking and
Finance in the West: The United Kingdom Experience". Islamic
Economic Studies, 7(1/2), 35-59.
Zeitun, R. (2012). "Determinants of Islamic and Conventional Banks
Performance in GCC Countries Using Panel Data Analysis". Global
Economy and Finance Journal, 5(1), 53-72.