Islamic banking refers to a system of banking that is free from interest, uncertainty and gambling. Another essential Islamic banking principle is the profit and loss sharing (PLS). Islam puts emphasis on greater reliance on PLS through Mudharabah and Musharakah (partnership financing). However, presently, most of the Islamic banking operation focuses on debt financing. The overuse of debt-based financing shows that Islamic banking replicates a mainstream banking model. Besides, the global financial crisis caused by debt has reduced efficiency and stability of banking system. Therefore, it is important for Islamic banks to see whether partnership financing helps to improve efficiency and stability of Islamic banking system. Hence, this book attempts to determine the effect of partnership financing on bank efficiency and bank stability. It also provides a thorough and critical analysis on how partnership financing affects bank efficiency and bank stability.