The research on Islamic banks is based on two distinct approaches: Islamic jurisprudence (Fiqh) and positive law. In the realm of positive law, the concept treats a bank as a money trader seeking maximum profit by relying on interest, which is a fundamental element in traditional banking. On the other hand, within Islamic jurisprudence, there is an acknowledgment of the contemporary importance of banks as modern economic institutions that are indispensable in any society. It attempts to reconcile the nature of banks, which rely on interest, with the Islamic Sharia's prohibition of usury (Riba) by establishing new entities, namely Islamic banks or non-interest banks. These banks engage in banking activities similar to conventional banks but avoid interest-based transactions, ensuring compliance with Islamic law in all their operations. This study aims to elucidate the nature, characteristics, and types of Islamic banks and analyze their economic effects. The significance of the topic lies in the anticipated role of Islamic banks in economic development, not only in advanced non-Muslim countries (e.g., the UK, which hosts significant Islamic investment funds) but also in Muslim countries like Egypt. This subject raises multiple challenges, particularly the fundamental question of how Islamic banks contribute to Egypt's economic development. This, in turn, leads to several key issues, including the capacity of Islamic banks to create employment opportunities, reduce unemployment, and combat poverty. It also raises the question of whether the current activities of Islamic banks meet expectations or if more was expected from them. In this research, a descriptive approach will be used to describe the issue in the study area. Subsequently, an analytical approach will be employed to understand the economic ramifications of these matters. The findings highlight significant challenges arising from competition in banking operations. Presently, Islamic banks lack diversity in various forms of financing, relying heavily on a single Islamic financing method. Therefore, it is imperative for Islamic banks to address these challenges by enhancing the skills of their employees, harnessing modern technology, diversifying their financing methods, and prioritizing real investments over monetary investments.