Challenges For Islamic Banks

Ch eachenges for Muslim Banks The unique characteristics of Moslem margeing give rise to a set of challenges that have to be addressed by Muslim banks. These include: Establishing appropriate percentage and fluidity focussing techniques Achieving tenacious sharia supervision Managing the endowment pool Addressing legal and tax income restrictions Establishing appropriate risk and liquidness forethought techniques: The risk profiles of Islamic finan¬cial institutions differ from those of their conventional forbidparts because of both(prenominal) of the Islamic financial backing techniques. For example, in an auto murabahah transaction, there is a risk that the customer decree not purchase the vehicle from the bank point though he commit¬ted to do so. The less standard¬ized the goods financed through with(predicate) murabahah, the greater the risk. This risk is even more relevant in the mutajarah business, in which the bank purchases accredited assets or commodities and holds them as inventory. As a result, Islamic banks motif to evaluate their risk focussing techniques and deploy appropriate capabilities to counter or mitigate risks. formulaic risk manage¬ment techniques and instruments be not wide-cuty fitted for all Islamic banks.

When an Islamic bank engages in the mutajarah business, for example, risk associ¬ated with attribute inventory must be managed, and thus cross-indus¬ study know-how such as that of retailersneeds to be transferred and applied accordingly. A major(ip) challenge facing Islamic banks is the absence of short-run liquidity management and longer-term refinancing instruments. As a result, asset indebtedness management is becoming a legitimate conundrum. On the short-term side, sharia-compliant notes market instruments are in short run and commodity-based exterminate murabahah transactions can sole(prenominal) be regarded as an meantime solution. A similar problem exists on the long financing side, where the issuance of sukuk is the only plectrum available nevertheless requires an rudimentary asset on which to...If you compliments to get a full essay, order it on our website: Orderessay

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