Risk Management In Islamic Banks Research Articles

Predictive Power of Random Forests in Analyzing Risk Management in Islamic Banking

This study utilizes the random forest technique to investigate risk management practices and concerns in Islamic banks using survey data from 2016 to 2021. Findings reveal that larger banks provide more consistent survey responses, driven by their confidence and larger survey budgets. Moreover, a positive link is established between a country’s development, characterized by high GDPs and low inflation and interest rates, and the precision of Islamic banks’ survey responses. Analyzing risk-related concerns, the study notes a significant reduction in credit portfolio risk attributed to improved risk management practices, global economic growth, stricter regulations, and diversified asset portfolios. Concerns related to terrorism financing and cybersecurity risks have also decreased due to the better enforcement of anti-money laundering regulations and investments in cybersecurity infrastructure and education. This research enhances our understanding of risk management in Islamic banks, highlighting the impact of bank size and country development. Additionally, it emphasizes the need for ongoing analysis beyond 2021 to account for potential COVID-19 effects and evolving risk management and regulatory practices in Islamic banking.

Relevansi Strategi Manajemen Risiko Pembiayaan dalam Konteks Perbankan Syariah

Financing risk management in Islamic banking is a crucial aspect related to the identification, measurement, control and monitoring of risks that may arise in financing provided by Islamic financial institutions. challenges faced by sharia financial institutions in managing financing risks. One of them is risks related to financing that arise due to the complexity of transactions and fluctuating economic conditions. This research aims to analyze the types of sharia business risks, sharia business models, measurement processes and monitoring processes of financing risk management in sharia banking. The research method used in this study is qualitative research with a descriptive approach. A qualitative approach is used in this research because this study aims to describe and understand the complexity of financing risk management strategies in Islamic banking. The results of this research show that in sharia business risk management, there are several categories of business risk, including financing risk, market risk, liquidity risk and operational risk. Financing risk focuses on the customer's capability to repay the financing provided by sharia financial institutions. Sharia business models include a variety of business strategies rooted in Islamic sharia principles, such as fairness, honesty and impartiality. These sharia business models include manufacturing, distributors, retail, franchising, sharia banking, and sharia microfinance, each of which emphasizes products and services that comply with applicable sharia principles.

MANAGING FINANCING RISK OF ISLAMIC BANKING PRODUCTS IN INDONESIA: A VALUE AT RISK APPROACH

This study aims to assess the potential risk and anticipated returns of equity and debt-based financing products in Islamic banking in Indonesia, represented by the three most prevalent contracts: musharakah, mudharabah, and murabahah. Data was collected from banks' monthly financial reports published on the Indonesia Financial Service Authority (OJK) website from 2014 to 2020, resulting in 82 observations. Data analysis was conducted using the Value at Risk (VaR) method with the variance-covariance approach. Among many methods, VaR is one of the most popular techniques that yields the most comprehensive results in measuring risk and return. The findings reveal that, in general, all equity and debt-based financing yielded stable risk and returns. However, equity-based financing produced higher returns, but also generated higher risks due to its uncertain nature. The results also demonstrate that risk management in Islamic banks improved gradually during the observation period, as indicated by the average score of portfolio combinations. These findings suggest that Islamic banks should balance their product offerings between equity-based financing and debt-based financing while simultaneously strengthening risk management, especially for murabahah products in equity-based financing.

Risk Management in Islamic Banking: The Impact of Financial Technologies through Empirical Insights from the UAE

Financial technology (fintech) innovations are transforming banking globally. Their adoption poses new opportunities and risks for Islamic banks with unique requirements. This study examines fintech’s implications for risk management effectiveness in United Arab Emirates Islamic banks. A conceptual model incorporates factors like fintech adoption, emerging capabilities, digital maturity, and IT security influencing outcomes. Primary data were collected via survey from nine UAE Islamic banks and analyzed using PLS-SEM. Results show that fintech adoption and capabilities positively impacted effectiveness, while digital transformation alone did not. The findings also show that the regulatory environment did not moderate relationships as hypothesized. The findings provide empirical evidence on optimizing risk management through responsible fintech enablement and oversight alignment in the UAE context.

Credit scoring and risk management in islamic banking: the case of Al Etihad Credit Bureau

This current research aims to assess the performance of Al Etihad Credit Bureau (AECB) operating in the United Arab Emirates (U.A.E.) in reducing credit risk in the Islamic banking model. The research aims to clarify the effects of credit scores on credit risk management in Islamic banks and the extent of adopting Islamic banks of these ratings when evaluating the borrowers. The study was done based on a primary qualitative research method where six top managers from AECB and nine managers from UAE’s Islamic banks who are involved with credits within the bank were interviewed using a structured interviews approach. It was found that Islamic banks perceive AECB services and products as useful for credit scoring and risk management as a supplement to their internal subjective rules and guides. AECB applies the same rating across banks and financial institutions in the UAE. The study has implications for Islamic banks, AECB, and financial policymakers in the UAE.

Liquidity Risk Management in Islamic Banks: Review of the Literature and Future Research Perspectives

This paper explores the distinctive characteristics of liquidity risk faced by Islamic banks as well as the typical challenges and constraints faced by these institutions; it also examines the strategies employed by these institutions to effectively manage and mitigate such risks. The inclusion of a literature review of most cited articles on the subject provides a summary of key studies and research conducted in the field of liquidity risk management in Islamic banking. It aims to cover various aspects of liquidity risk management in Islamic banks, including risk identification, measurement, mitigation strategies, governance, interbank relationships regulatory considerations, and the role of Shariah compliance. It offers both researchers and practitioners seeking comprehensive knowledge on the subject an overview of the existing body of knowledge, enabling them to understand the current state of research and build upon existing insights. By offering a comprehensive coverage of current information and practical strategies available in the literature, this paper aims to add significant value to the understanding and implementation of liquidity risk management in Islamic banks. We mean for it to serve as a valuable resource for researchers, practitioners, regulators, and stakeholders involved in Islamic finance and risk management. By stressing the persistent need for effective liquidity risk strategies in the Islamic banking sector and offering insights into the application of liquidity risk management practices that align with Islamic finance principles, we attempt to address a gap in the existing literature that could constitute the basis for future research perspectives.

Digital transformation: An empirical analysis of operational efficiency, customer experience, and competitive advantage in Jordanian Islamic banks

This research aims to investigate the impact of digital transformation on the operational efficiency, customer experience, competitive advantage, organizational performance, and risk management in Jordanian Islamic banks. A descriptive analytical method was used, collecting primary data from a survey of 68 employees across four Islamic banks. Statistical tools, including linear regression and correlation, were used for data analysis and hypothesis testing. The findings revealed that digital transformation significantly influences the operational efficiency, competitive advantage, customer experience, organizational performance, and risk management of Islamic banks at a significance level of α ≤ 0.05. While digital transformation generally enhanced operational outcomes and customer experience, it also increased exposure to risks such as electronic attacks, fraud, and privacy concerns. The results highlight the importance of integrating digital transformation in Islamic banking while employing robust risk management strategies. These findings provide insights for policymakers, bank managers, and researchers in formulating strategic initiatives for digital transformation in the banking sector. The research contributes to the literature by focusing on the role of digital transformation in Islamic banking, a less-explored area in academic studies. This research also presents valuable implications for practice, specifically for banks and regulators to balance the potential of digital transformation with the associated risks.

Capital requirements – risk taking/stability nexus during the global financial crisis and COVID-19: international evidence of Islamic banks

Purpose This study aims to determine how Basel III capital requirements affect the stability of Islamic banks globally during the global financial crisis and the COVID-19 pandemic. Design/methodology/approach The secondary data for all Islamic banks worldwide from 2004 to 2021 is obtained from the FitchConnect database. The main technique was a two-step generalized method of moment (GMM) system, and the data were tested using pooled ordinary least squares, fixed effects and difference GMM models for robustness checks. Findings Regression results support the moral hazard hypothesis based on evidence that both the total capital ratio and the Tier 1 capital ratio have a statistically significant positive impact on the stability of Islamic banks globally. Furthermore, neither the global financial crisis of 2008–2009 nor COVID-19 (2020–2021) significantly impacted the stability of Islamic banks worldwide. The results are robust across alternative measures of stability, capital buffers, dummy variables and estimation techniques. According to the descriptive statistics, the number of Islamic banks that disclose their regulatory capital ratios to the public has increased over the study period, and the mean of total capital and Tier 1 ratios are considerably greater than what is required by Basel II and Basel III. Research limitations/implications Bankers, regulators and policymakers should benefit from the evidence on capital and risk management in Islamic banking according to Basel Committee on Banking Supervision (BCBS) and Islamic financial services board (IFSB) international standards in various jurisdictions. Originality/value This research builds on earlier studies that were both beneficial and instructive by exploring the relationship between BCBS and IFSB capital guidelines and the trustworthiness of Islamic banks in greater depth. This study uses numerous capital ratios, buffers and stability measures to provide an international context for research on Islamic banking. In addition, the database is up-to-date to include information about the COVID-19 pandemic aftereffects in the year 2021. This study also introduces the Basel membership of Islamic banks to provide context for countries still at the Basel II stage or are yet to begin implementing the Basel III international standard.

Dampak Kepatuhan Syariah terhadap Kinerja Keuangan Bank Syariah: Studi Kasus pada Struktur Pengawasan dan Manajemen Risiko

Shariah compliance is important for Islamic banks because it is one of the factors that determines their financial performance. This study aims to analyze the impact of shariah compliance on the financial performance of Islamic banks, with a case study on the supervisory structure and risk management. This study uses a case study method with three Islamic banks in Indonesia as the object of study. The data used in this study is secondary data obtained from the annual reports of these Islamic banks. The results of the study show that shariah compliance has a positive impact on the financial performance of Islamic banks. This impact can be seen from several aspects, including: Profitability: Islamic banks with high shariah compliance have better profitability than those with low shariah compliance, Liquidity: Islamic banks with high shariah compliance have better liquidity than those with low shariah compliance, Risk: Islamic banks with high shariah compliance have lower risk than those with low shariah compliance. Shariah compliance also has a positive impact on the supervisory structure and risk management of Islamic banks. This impact can be seen from several things, including: Supervisory structure: Shariah compliance can enhance the role of the Shari'ah Supervisory Board (SSB) in overseeing the business activities of Islamic banks, Risk management: Shariah compliance can enhance the role of the risk unit in managing risks related to shariah compliance. Based on the results of this study, it can be concluded that shariah compliance is an important factor that determines the financial performance of Islamic banks. Strong supervisory and risk management structures can help Islamic banks to improve shariah compliance and, ultimately, improve their financial performance.

Risk Management in Islamic Banking System: An Overview of Current Modules

Islamic banking has gained prominence in the global financial landscape due to its adherence to Sharia principles. However, like any other financial system, it is not immune to risks. Effective risk management is crucial to ensure the stability and sustainability of Islamic banking institutions. This research paper aims to provide an overview of the current modules of risk management in Islamic banking. It explores the different types of risks faced by Islamic banks, the strategies employed to manage these risks, and the challenges and future trends in this dynamic field.

How to Overcome the Risk of Islamic Banks: Evidence from Indonesia

Risk management is a crucial aspect of Islamic banking to ensure the sustainability and operational safety of banks and maintain the trust of customers and stakeholders. This article discusses the importance of risk management in the context of Islamic banking and analyzes the challenges faced by Islamic banks in managing risks. This research adopts a qualitative approach, with a focus on collecting in-depth descriptive and interpretative data. The study involves text analysis and case studies of Islamic banks in Indonesia. This article discussed the basic concepts of risk management in the context of Islamic banks, including risk identification, risk evaluation, and risk control. We explain the importance of comprehensive risk assessment and the use of appropriate risk management tools to address specific risks faced by Islamic banks. By analyzing these challenges, this article provides a comprehensive overview of risk management in Islamic banking and offers recommendations to enhance the capabilities of Islamic banks in effectively managing the risks. Finally, the author offers a model for overcoming the risk of Islamic banks with the Hexagonal Model consisting of two sides (internal and external) and six main cores: Education, Identification, Accountable, Guidelines, Research, and Technology.

Impact of financial instruments development on Risk Management in Islamic Banks in the Gaza Strip

his study aims at identifying the Impact of financial instruments’ development on Risk Management in Islamic Banks in Gaza Strip. In order to realize the objectives, the study uses primary and secondary data. A questionnaire was designed to suit the subject and objectives of the study. A total of (139) questionnaires were distributed, and the number of retrieved questionnaires was (128) which equals 92%. The responses of the respondents were analyzed using the appropriate statistical methods. The study uses the analytical descriptive method. The study finds a statistically significant correlation between financial instruments development and risk management techniques in the Islamic banks. The study also shows a statistically significant impact on financial instruments’ development (efficiency, finding solutions) successively on risk management. The study recommends that Islamic banking should adhere to the legal rules that make financing more credible. And the caution of the adoption of Islamic banks on the efficiency in achieving their resources, and the availability of a high degree of cognitive integration. Islamic banks say they are finding new financial instruments that are compatible with the ongoing market developments. Moreover, the risk of the initiative of Islamic banks to develop strategies for innovation and development to gain more of the global market. Invest in price changes in international capital markets to adjust the investment portfolio to increase returns and reduce liquidity risk, and then call the risk management personnel the required managerial and technical skills.

Manajemen Risiko Perbankan Syariah

Nowaday, the development of sharia banking on a global scale is increasing rapidly marked by major advances in muamalah issues due to the emergence of the desire of the majority of Muslims to practice Islam in a comprehensive manner, including in the field of Islamic economics, especially sharia banking. In carrying out its operational activities, sharia banks must implement sharia principles so that a good regulatory framework is needed in order to create a good environment for the growth and development of the sharia banking industry and the stability of the financial sector as a whole. The effectivity of risk management in Islamic banks needs special attention because there are many complex issues that need to be better understood, especially related to the nature of the specific risks faced by Islamic banks simultaneously related to the ways and methods of Islamic financing through the use of a combination of methods and contracts that are permissible related issues regarding returns or PLS (profit loss sharing) and non-PLS so that this paper will raise a number of issues in risk measurement, recognition, collateral adequacy and others. Therefore, this paper aims to discuss various solutions, innovations and appropriate adjustments from the aspect of risk management related to the special characteristics of Islamic financial products and services in Islamic banking.

Istisna` risk Management in Islamic Banks

This study aimed to identify the policies and procedures applied in Islamic banks to manage the risks of the Istisna` model. To achieve this objective, a descriptive and a case study approach were applied to identify the risks that can arise from implementing this model, and the adequate plans to face them.
 The study found that the Islamic bank faces many risks, when applying the Istisna` model, and by studying the case of Malaysia, it became clear that the country relies on several policies and procedures, such as using takaful insurance, guarantees, and adhering to the decisions and guidelines of the Basel Committee (BCBS) and Islamic Financial Services Board (IFSB).
 
 

PENYALAHGUNAAN DANA DEPOSITO MILIK NASABAH DITINJAU DARI KETENTUAN HUKUM PERBANKAN SYARIAH

AbstractIslamic banks in carrying out their business activities are very likely to be faced with a dispute involving customers and the Islamic bank itself. Not infrequently these disputes arise due to the actions of employees of Islamic banks. This study aims to examine the competence in sharia banking dispute resolution and legal considerations in the Supreme Court Decision No. 2454k/pdt/2019 is related to the legal provisions of Islamic banking. This study uses a qualitative method with a normative juridical approach as well as a descriptive analytical research specification. The results of the study indicate that the absolute competence of sharia banking dispute resolution only exists in the Religious Courts. In addition, BRI Syariah Bank's liability for compensation to customers is a form of taking over the responsibilities of employees by the bank as regulated in Article 1367 of the Civil Code. The compensation is based on the principle of prudence, risk management of Islamic banks, and the bank's function as an agent of trust.Keywords: Islamic Bank, Competence, Responsibility

İSLAMİ BANKALARDA RİSK YÖNETİMİ: TÜRKİYE'DEKİ KATILIM BANKALARI ÜZERİNDE BİR ARAŞTIRMA

Risk management is of strategic importance for banks whose operations are largely based on risky transactions. Islamic banks face almost all risks exposed in conventional banks. Risks are further diversified and complicated in Islamic banks. In this respect, risk management in these banks requires some unique risk measurement, risk mitigation and risk management systems. Also, Islamic banks cannot use some of the methods used by conventional banks in risk management. Therefore, there is a need for unique methods compliant with Shariah principles. In this paper, a detailed literature review has been conducted on studies investigating risk management in Islamic banks and the theoretical framework of the subject was established. Then, a qualitative research was conducted in order to identify the main risks encountered in Islamic (Participation) banks operating in Turkey. The risk management techniques of these banks were examined and compared with conventional banks. Also, main problems in risk management were determined and possible solutions were recommended in this context. Within the scope of the research, the data obtained by the interview method was interpreted by descriptive analysis method. According to results, risk management in Islamic banks is largely similar to conventional banks. On the other hand, different types of risks encountered in these banks and the obligation to comply with Islamic principles differentiate Islamic banks in the risk management process.

Studi Literatur Kritis Risiko Reputasi pada Manajemen Risiko Perbankan Syariah

Reputation is the most important intangible asset owned by a bank. Reputation reflects the success of the bank in meeting the expectations of various stakeholders. Creating reputation is a key element of organizational strategy, especially banking. Any important issues related to the operations of Islamic banks, whether in terms of non-compliance with Sharia financial products or customer complaints, can damage the reputation of Sharia banks. This study aims to analyze the determinants of reputation risk and its impact on Islamic banking and how to implement reputation risk management in Islamic banking. This study uses a literature study approach to answer the research objectives, while the analytical technique used in this study is content analysis. Thus, Islamic banks are expected to pay more attention to reputation risk management.

Risk management in Islamic banks: a thematic synthesis and bibliometric analysis

Risk management in Islamic banks: a thematic synthesis and bibliometric analysis

Risk management in Islamic banks: a thematic synthesis and bibliometric analysis

Risk management in Islamic banks: a thematic synthesis and bibliometric analysis

Exploring duration gap of Islamic banks during COVID-19 crisis: an inter-regional online focus group study

This study explores the duration gap risk management of Islamic banks during the COVID-19 crisis using online focus group studies. There are 12 participants from Indonesia, Malaysia, Pakistan and UAE. Findings suggest that COVID-19 has increased the duration gaps of Islamic banks. The causes include, lack of business opportunities, relaxations in terms of policy rates, restructuring offered by central banks and attitudes of the customers of Islamic banks to avail relaxations offered, whether they need it or not. Finally, the crisis has exhibited that customers have managed their spending according to conventional theories of demands of money and Maslow's hierarchy of needs.