Islamic finance in Middle East and North Africa (MENA) countries has become an important element of these countries' development agendas, and it is also gaining ground in the financial landscape of the region. It is a growing business as it caters to the financial needs of the people without conflicting with their social and religious values. This paper analyzes the state of Islamic banking in the MENA region. It explores the major Islamic banking models that are in practice along with the explanation and analysis of major balance sheet items on the asset and the liability sides based on a unique dataset of Islamic banks. The paper also models and analyzes the key drivers of Islamic banking along with an assessment of their relative importance; evaluates the performance of Islamic banking and compares it with conventional banking in the region. Lastly, it evaluates the affect of financial crisis on Islamic banks along with an explanation of possible channels of its impact. The paper finds that the overall growth of the conventional financial sector is an important determinant of growth of Islamic banking, implying there are some common factors that are important for the growth of both the conventional and Islamic finance. However, it is strong regulatory support and political will that stand out even more than demand for Islamic finance as a major driver of the growth of Islamic banking in the MENA region.