Challenges For Islamic Banks

Ch all toldenges for Muslim Banks The unique characteristics of Muslim banking give rise to a set of challenges that have to be addressed by Moslem banks. These include: Establishing appropriate luck and fluidity focussing techniques Achieving coherent sharia supervision Managing the talent pool Addressing legal and gross restrictions Establishing appropriate risk and liquidity solicitude techniques: The risk profiles of Islamic finan¬cial institutions differ from those of their conventional counterparts because of some of the Islamic backing techniques. For example, in an auto murabahah transaction, there is a risk that the customer range not purchase the vehicle from the bank even though he commit¬ted to do so. The less standard¬ized the goods financed by dint of murabahah, the greater the risk. This risk is even more relevant in the mutajarah business, in which the bank purchases certain assets or commodities and holds them as inventory. As a resu lt, Islamic banks need to evaluate their risk management techniques and deploy appropriate capabilities to counter or mitigate risks. formulaic risk manage¬ment techniques and instruments are not safey fitted for all Islamic banks.

When an Islamic bank engages in the mutajarah business, for example, risk associ¬ated with retentiveness inventory must be managed, and thus cross-indus¬ study know-how much(prenominal) as that of retailersneeds to be transferred and applied accordingly. A major challenge facing Islamic banks is the absence of short-run liquidity management and longer-term refinancing instrument s. As a result, asset indebtedness managemen! t is becoming a real problem. On the short-term side, sharia-compliant funds market instruments are in short run and commodity-based deform murabahah transactions can only be regarded as an meantime solution. A similar problem exists on the long financing side, where the issuance of sukuk is the only option available nevertheless requires an cardinal asset on which to...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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