Timur Kuran had an article in the Financial Times a day or two ago in which he said amongst other things that "Islamic banking, in it's current form, will go down in history as a mighty deceit...". He also says the main reason that British universities teach Islamic finance is that there given loads of money by the Saudis to do so. And on the question as to whether Islamic finance is actually practiced in the Muslim world, the article says "Not at all. The overwhelming majority of the Muslim world's business schools teach the economics taught at the world's leading business schools".
There is more about Timur Kuran here.