Risk Management For Islamic Banks

For the community bank, goals are incorporated into the risk management program established by the CRO and management. To ensure the bank serves the local community, the identification and management of risks and loss exposures, in addition to, policies and procedures enable the institution to thrive. Tolerable uncertainty, legal and regulatory compliance, economy of operations, social responsibility are pre-loss goals, whereas, survival, business continuity, profitability and growth, and earnings stability are post-loss goals. The attainment of each risk management is addressed.

Hennie and Iqbal (2008) stated in their risk analysis for Islamic banks book that Islamic

Islamic Banking is quite similar to a conventional bank. Only here the essential feature is that it is Interest Free i.e. it purely follows the Islamic law – Sharia’h (Rules) and guided by the Islamic Economics that forbids the both the payment and the receipt of Riba (Interest). The two main principles are basically Banks will share the Profit & Loss (enabling risk sharing) and disallow Interest in any form.

the First International Conference on Islamic Banking, held in Dubai in 1979, it has not been widely implemented throughout Islamic financial system (Bendjilali and Khan,1995, p. 16). It is a relatively new and very little used product available for Islamic banks. The paper claims that MMQ is more in line with Shari’ah teachings and as such should be used more by Islamic financial institutions. The study indicates that MMQ possibly has a comparative advantage for both financiers and the customer when compared with

Shahjanaz Kamaruddin begins this article by stating that Malaysia has developed into becoming a full-fledged Islamic financial system operating in parallel to its conventional counterpart. Islamic finance is based on the Islamic principle of Syariah which is relevant in today’s world. According to the Islamic Finance Development (IFD) Report 2014, Malaysia is the undisputed in sukuk(bond) with a 63% of global market share. Malaysia performs very well across 5 indicators which are quantitative development, knowledge, governance, CSR (corporate social responsibility) and

Global Islamic banking continues to be an exciting growth story characterized by robust macro outlook of core Islamic

Banking crisis has been much more frequent than any of the expectations by research or any of the banks. The annual probability of a crisis has been judged to be around 4-5% in both the industrial sector and emerging market countries (Walter, 2010). The banking sector has been effected by many factors which contributes to its vulnerability. Some of the factors that adds to the vulnerability of the bank are minimum availability of high-quality capital, lack of high quality liquid assets, and sources for reliable funding.

participants. Rather it should accept those risks that are uniquely part of the array of bank’s services. 1.2.3 In every financial institution, risk management activities broadly take place simultaneously at following different hierarchy levels. a) Strategic level: It encompasses risk management functions performed by senior management and BOD. For instance definition of risks, ascertaining institutions risk appetite, formulating strategy and policies for managing risks and establish adequate systems and controls to ensure that overall risk

Pakistan’s Banking sector was selected for this research. Calmative is the nature of this study. Open

In most jurisdictions where Islamic banks operate, they have to compete with conventional banks involved in interest-based borrowing and lending. The legal framework governing the licensing of banks and their regulation was designed primarily for conventional institu¬tions, not least as there were no Islamic banks in existence in most cases when the banking laws were drafted. Three choices therefore arise: firstly, whether Islamic banks can be accommodated within existing legal provision, whether the existing banking legislation requires amendment or, more radically, whether new legislation is necessary.

Functions and governing modes are stood on Shariah and Islamic banks must make sure that all business actions are conforming to shariah necessities.

Similarly, Mobarek & Kalonov (2014) provided empirical evidence, using two frontier approaches, from many OIC countries to compare Islamic and conventional banking. They found that though conventional banks more efficient in their operations, Islamic banks had an upper hand when it came to financial stability. Their extensive study covered pre-crisis and crisis periods. The finding of Mobarek & Kalonov (2014) is validated by an earlier study conducted by Al-Hares, AbuGhazaleh, & El-Galfy (2013) in which they studied banks from 2003-2011. Al-Hares, AbuGhazaleh, & El-Galfy (2013) found that Islamic banks in Gulf Cooperation Council (GCC) were less efficient than

Results indicate that conventional banks perform better in profitability, while Islamic banks perform better in liquidity and credit risk. In t-test of the return on asset (ROA) and total equity to net loans, there are no major difference between Islamic banks and non-Islamic banks. In the return on equity and common equity to total assets, there are statistically significant differences in these two groups. The statistically significant difference was shown in the area of liquidity which means that the Islamic banks liquidity performance has major difference with the non-Islamic banks.

The challenge for Muslim countries like Bangladesh is to overcome its late entry into the market against well-established jurisdictions all over the world. Another subsequent challenge would also be to educate the masses and the other industry stakeholders regarding Islamic Problems and Prospects of Islamic Capital Market In Bangladesh 59 financial principles, products and investments. The challenge for them is to motivate authorities to provide favorable platforms and policies to make such initiatives viable. The Islamic financial operations are subjected to strange rules different from the ones applicable to the conventional operations; there are a number of challenges being faced by ICM. For instance, in many cases, the Islamic capital market has had to comply with the regulatory provisions meant for the conventional system which has an entirely different underlying objective and approach. Additionally, it should be noted that the

the establishment of Islamic banking in Bangladesh. Later In November 1982, a entrustment of IDB triped Bangladesh and proclaimed enthusiastic interest to contribute or the establishing a Islamic bank through joint venture especially in the private domain. Two proficient bodies such as the Islamic Economics Research Bureau (IERB) and the Bangladesh Islamic Bankers ' Association (BIBA) ended noteworthy groundwork on the way to initiate a Islamic banking in Bangladesh. They gave several training and workshop on the law and the regulation as well as the processing of Islamic banking to different top level bank officers, economist, and scholars. Mean the time different seminars, roundtable meeting, dialouge , cros talk and symposiam as well as the workshops on Islamic banking ccross the country.