Challenges For Islamic Banks

Ch wholeenges for Muslim Banks The unique characteristics of Islamic banking give rise to a set of challenges that have to be addressed by Islamic banks. These include: Establishing appropriate luck and liquidness focussing techniques Achieving agreeable sharia supervision Managing the talent pool Addressing legal and revenue enhancement 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 financing techniques. For example, in an auto murabahah transaction, there is a risk that the customer reenact not purchase the vehicle from the bank even though he commit¬ted to do so. The less standard¬ized the goods financed by 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 result, Islamic banks need to evaluate their risk guidance techniques and deploy appropriate capabilities to counter or mitigate risks. conventional risk manage¬ment techniques and instruments are not lavishy fitted for all Islamic banks.

When an Islamic bank engages in the mutajarah business, for example, risk associ¬ated with guardianship 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 refin ancing instruments. As a result, asset indeb! tedness management is becoming a real problem. On the short-term side, sharia-compliant capital market instruments are in short run and commodity-based rustle murabahah transactions can only be regarded as an meanwhile solution. A similar problem exists on the long financing side, where the issuance of sukuk is the only option available nevertheless requires an vestigial asset on which to...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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