Integrated central bank supervision in Islamic banking: necessities, challenges and solutions

Purpose This study aims to examine the necessity and challenges of integrated central bank supervision in the Islamic banking system, with a focus on proposing practical solutions to overcome these challenges. By identifying critical areas where supervision is essential and addressing the unique obstacles faced by the sector, this research seeks to provide actionable recommendations that enhance the effectiveness of regulatory oversight in Islamic banking. Design/methodology/approach This research adopts a mixed-methods approach, beginning with a comprehensive literature review to identify the necessity and challenges of integrated supervision. This is followed by the design and administration of semistructured interviews with experts in the field of Islamic banking. Qualitative data from these interviews are analyzed to gain deeper insights into the specific issues and potential solutions. Findings This study finds that integrated central bank supervision is crucial for maintaining financial stability, ensuring compliance with Sharia standards and protecting customer rights in the Islamic banking system. However, significant challenges such as the complexity of Islamic banking products, a shortage of specialized human resources and inadequate technological infrastructure hinder effective supervision. The findings suggest that addressing these challenges requires ongoing investment in technology, capacity building and international cooperation. Originality/value This research contributes to the existing body of knowledge by providing a detailed analysis of the specific needs and challenges associated with the supervision of Islamic banking. It offers practical insights for policymakers and regulators, highlighting the importance of a tailored, multifaceted approach to supervision that aligns with both the unique characteristics of Islamic banking and international standards. This study also identifies key areas for future research, including the impact of technology on supervision and the influence of organizational culture on regulatory practices.