Several studies such as, [27], [28], [29], [18], [21], highlighted the Risk management for Islamic banks in different countries and the differences between them and Conventional banks. Where [21] conducted a field study of risk management and Islamic banks, where a study on 17 Islamic bank in 10 countries (including Bahrain, Egypt, Malaysia and the United Arab Emirates). And suggests that Risk Management for Islamic banks include three basic components: Establishing Appropriate Risk Management Environment and Sound Policies and Procedures, Banks must have regular management information systems for measuring, monitoring, controlling and reporting different risk exposures, and Banks should have internal controls to ensure that all policies are adhered to. The study arranged the types of risks facing the Islamic banks where the interest rate risk to the most serious and then operating risk, liquidity risk and, to a lesser extent, the credit risk, the market risk are the least danger in Islamic banks.
Some studies such as [30], [31], [32], Focused on risk management and Islamic banks in the countries of Middle East. Study [32] was conducted on 421 countries Bank Middle and Far East. found that Islamic banks are less vulnerable and more stable and able to cope with the financial crisis compared to conventional banks. The study [30] sees that the most important risks to Islamic banks in the Middle East is the liquidity risk, followed by credit risk, as well as other risks the
With respect to risk management in Islamic banks, Islamic Financial Services Board (IFSB, 2005), [26], issued guiding principles for risk management in Islamic financial institutions, the board pointed out that these guiding complement the general guiding principles issued by the Basel Committee. to cover specific aspects of the institutions of the Islamic financial services. As follows:
• Credit Risk: It must be placed, a strategy for financing, using various instruments in compliance with Shariah
OF SARAJEVO
FACULTY OF ECONOMICS
UNIVERSITY OF BOLTON
ISLAMIC BANKING MASTER STUDIES
“CREDIT RISK IN ISLAMIC FINANCE”
Module title: Risk Management in Islamic Finance
Student: 3669/15 IB
Tutor: Mohammad Sabri, PHD
Risk
Risk is contemporary and continuous challenge in the world of finance. In general, risk is understood as a situation where an uncertainty of desired results exists, as well as the undesirable consequences. Risk is studied as a subject within several social sciences
In the Islamic banking system,according to sources and causes of risks, it might be an external risk which due to changes in risk policies and regulations caused by banking supervisory authorities ( regulatory risk ) or macro and external impact of benchmarks such as LIBOR interest rate factors, namely the use of determine the speed mark Islamic Bank ( known as interest rate risk ) ;There are risks to fulfill obligations related to the debtor by Islamic Banking( Credit risk ) , there are a set of
Abstract
It is undeniable fact that Islamic banking system has been flourishing for last few decades and now has become the focus of global market forces. Pioneers of Islamic banking proclaim that foundational principles of Islamic banking is allied with Shari’ah guidance and their accounting practices, policies and financial reporting mechanism is based on Sharai’ah values. Consequently, Islamic institutions have the responsibility to follow Islamic rulings in all their practices. The core purpose
performance of Islamic banks in comparison to conventional banks. The performances will be measured over a 5-year period from 2009 to 2015. In comparing Islamic and conventional banks, profitability and liquidity will be examined.
Introduction
Islamic finance refers to the provision of financial services in accordance with the Shari’ah Islamic law, principles and rules. The principles of which “emphasise moral and ethical values in all dealings have wide universal appeal” - (Institute Of Islamic Banking
Islamic banking is a structure that allows conducting banking activities and trades in line with the Islamic Shari’ah laws and principles by avoiding all the haram (prohibited) activity such as interest and financing prohibited businesses.
An Islamic financial institution such as financial banking has been established before two or three decades ago in the aim to provide satisfactory financial facilities to the interested parties as compared to conventional banks. In 1974 Dubai Islamic bank which
Islamic Banking vs. Conventional Banking
In most Islamic countries, they tend to practice two types of financing in banking industry which are conventional and Islamic banking. The country like in Malaysia has successfully developed an Islamic banking system that operates in parallel with the conventional banking system. There is similarity between conventional banking and Islamic banking which helps to promote economic growth provided financing services such as credit facilities for business activity
CHALLENGES TO ISLAMIC FINANCE INDUSTRY
Many authors agree that Islamic finance industry has a long way to become globally successful industry. To achieve its potential for solid growth, Islamic finance must improve number of areas including: improving regulatory supervision in the industry, adaptation of tax treatment to Islamic banking products, establishing liquidity control, introducing risk management tools, supporting standardization of financial products and others.
Prasad (2015) mentions
1.0 Introduction
Islamic banking refers to a system of banking that complies with Islamic law, also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between the provider of capital (investor) and the user of funds (entrepreneur). In other words, it ensures an equal contribution for all parties involved, whether in profitability or in case of any loss occurred. Activities that involve interest (riba), gambling (maisir) and speculative
learning from the study
Part two
7. What is Islamic Banking
8. What are the transaction process of Islamic banking
9. The key sources of law and values of Islamic Banking
10. The differences between Islamic Banking and conventional Banking
Part three
11. A comparative analysis
12. Conclusion
Basic differencess:
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