Risk Assessment of Islamic Banking Products: A Case Study of Murabaha and Ijarah

There are several implications for the risk management strategy of any financial organization that has adopted the Islamic banking philosophy. Generally speaking, Islamic banking is exposed to the same risks as traditional banking, such as credit, market, liquidity, and operational risks. On the oth...

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Main Authors: Yusoff A., Hassan R., Salman S.A.
Other Authors: 55542782500
Format: Conference Paper
Published: Springer Science and Business Media Deutschland GmbH 2024
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spelling my.uniten.dspace-347092024-10-14T11:21:56Z Risk Assessment of Islamic Banking Products: A Case Study of Murabaha and Ijarah Yusoff A. Hassan R. Salman S.A. 55542782500 55541623500 56901963000 Assessment Islamic banking Murabaha and Ijarah Risks Commerce Finance Risk assessment Wages Assessment Case-studies Credit risks Islamic banking Liquidity risk Market risks Murabaha and ijarah Operational risks Risk management strategies Risks assessments Risk management There are several implications for the risk management strategy of any financial organization that has adopted the Islamic banking philosophy. Generally speaking, Islamic banking is exposed to the same risks as traditional banking, such as credit, market, liquidity, and operational risks. On the other hand, the sources of risk and risk mitigation strategies differ from those used in conventional banking. Many agreements may be subjected to the same risks, but how those risks influence each contract may vary. Islamic banks are obligated to follow Shariah principles in their business activities. According to Islamic law, loans and deposits with a predetermined fixed return are not permitted under Shariah principles. Consequently, Islamic banks� resource mobilization and funding are based on profit-sharing and risk-sharing arrangements. While risk is a necessary component of Islamic business dealings, uncertainty (Gharar) is illegal. This article aims to assess the specific risks associated with contracts issued by international financial institutions (IFIs), emphasizing two types of Shariah contracts, namely Murabaha and Ijarah. It has been established that both Murabaha and Ijarah, sale-based contracts, will subject the financial institution to the same risks, including credit, operational, market, and liquidity risks. � 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG. Final 2024-10-14T03:21:56Z 2024-10-14T03:21:56Z 2023 Conference Paper 10.1007/978-3-031-26956-1_55 2-s2.0-85152558068 https://www.scopus.com/inward/record.uri?eid=2-s2.0-85152558068&doi=10.1007%2f978-3-031-26956-1_55&partnerID=40&md5=059b7089ac51372286a42fa34442fac2 https://irepository.uniten.edu.my/handle/123456789/34709 621 LNNS 581 592 Springer Science and Business Media Deutschland GmbH Scopus
institution Universiti Tenaga Nasional
building UNITEN Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Tenaga Nasional
content_source UNITEN Institutional Repository
url_provider http://dspace.uniten.edu.my/
topic Assessment
Islamic banking
Murabaha and Ijarah
Risks
Commerce
Finance
Risk assessment
Wages
Assessment
Case-studies
Credit risks
Islamic banking
Liquidity risk
Market risks
Murabaha and ijarah
Operational risks
Risk management strategies
Risks assessments
Risk management
spellingShingle Assessment
Islamic banking
Murabaha and Ijarah
Risks
Commerce
Finance
Risk assessment
Wages
Assessment
Case-studies
Credit risks
Islamic banking
Liquidity risk
Market risks
Murabaha and ijarah
Operational risks
Risk management strategies
Risks assessments
Risk management
Yusoff A.
Hassan R.
Salman S.A.
Risk Assessment of Islamic Banking Products: A Case Study of Murabaha and Ijarah
description There are several implications for the risk management strategy of any financial organization that has adopted the Islamic banking philosophy. Generally speaking, Islamic banking is exposed to the same risks as traditional banking, such as credit, market, liquidity, and operational risks. On the other hand, the sources of risk and risk mitigation strategies differ from those used in conventional banking. Many agreements may be subjected to the same risks, but how those risks influence each contract may vary. Islamic banks are obligated to follow Shariah principles in their business activities. According to Islamic law, loans and deposits with a predetermined fixed return are not permitted under Shariah principles. Consequently, Islamic banks� resource mobilization and funding are based on profit-sharing and risk-sharing arrangements. While risk is a necessary component of Islamic business dealings, uncertainty (Gharar) is illegal. This article aims to assess the specific risks associated with contracts issued by international financial institutions (IFIs), emphasizing two types of Shariah contracts, namely Murabaha and Ijarah. It has been established that both Murabaha and Ijarah, sale-based contracts, will subject the financial institution to the same risks, including credit, operational, market, and liquidity risks. � 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.
author2 55542782500
author_facet 55542782500
Yusoff A.
Hassan R.
Salman S.A.
format Conference Paper
author Yusoff A.
Hassan R.
Salman S.A.
author_sort Yusoff A.
title Risk Assessment of Islamic Banking Products: A Case Study of Murabaha and Ijarah
title_short Risk Assessment of Islamic Banking Products: A Case Study of Murabaha and Ijarah
title_full Risk Assessment of Islamic Banking Products: A Case Study of Murabaha and Ijarah
title_fullStr Risk Assessment of Islamic Banking Products: A Case Study of Murabaha and Ijarah
title_full_unstemmed Risk Assessment of Islamic Banking Products: A Case Study of Murabaha and Ijarah
title_sort risk assessment of islamic banking products: a case study of murabaha and ijarah
publisher Springer Science and Business Media Deutschland GmbH
publishDate 2024
_version_ 1814060125319593984
score 13.209306