The developmental role of Islamic banking in the finance and investment world has over the last two decades witnessed tremendous progress and acted as a catalyst to the economic growth of certain nations thus indicating that Islamic banking has critical roles to play for every developing economy in the 21^st century and beyond. The concept of Islamic Finance and the tenets in which Islamic Banks operate is based on the Islamic Law “Shari’ah”, called the fiqh muamalat, meaning “Islamic rules on transactions” and its practical application through the development of Islamic economics. These rules and the practices have their origins from the Holy Book of “Quaran”. Other sources of the rules and practices of the fiqh muamalat are the “Sunnah” and other sources of Islamic law.

Citing empirical facts and working models, the purpose of this papers is to explore and examine the positive relationships that exists between the development of Islamic banking and the economic growth of a nation’s financial sector with a strong case for developing economies. This paper projects the likely roles, structure and future of Islamic banking in restructuring the banking industry for increased participation in economic growth

The findings of this paper has practical implications for catalyzing socio-economic and sustainable development in national economy

KEY WORDS: Islamic banking, Shari’ah, Economic development, Sustainability