Risk and Islamic banks: a study on Malaysian Islamic banks

  • Authors

    • Faridah Najuna Misman
    • Wahida Ahmad
    • Noor Sufiawati Khairani
    https://doi.org/10.14419/ijet.v7i3.35.29281
  • Islamic Banks, Risk.
  • This study examines the major risk faced by Islamic banks specifically in Malaysia. Furthermore, this study also focuses on the risk profile of Islamic banks compared to conventional banks. To achieve the objectives, this study adopts a case study analysis by inverviewing and closely examines the annual reports of four major Islamic banks in Malaysia. The findings reveal that credit risk is the main risk faced by the Islamic banks in Malaysia. Moreover, consistent with the literature, the findings also suggest that specific features of Islamic banks pose an extra and unique risk compared to conventional banks.

     

     

  • References

    1. [1] Ahmed, H. (2011). Risk Management Assessment Systems: An Application to Islamic Banks. Islamic Research & Training Institute (IRTI), 19(1), 63-86.

      [2] Ahmed, H., & Khan, T. (2007). Risk Management in Islamic Banking. In M. K. Hassan & M. K. Lewis (Eds.), Handbook of Islamic Banking (pp. 144-158). Cheltenham,UK: Edward Elgar Publishing Limited.

      [3] Ariffin, N. M., Archer, S., & Karim, R. A. A. (2009). Risks in Islamic Banks: Evidence from Empirical Research. Journal of Banking Regulation, 10(2), 153-163.

      [4] Arunkumar, R., & Kotreshwar, G. (2005). Risk Management in Commercial Banks (A Case Study of Public and Private Sector Banks). SSRN eLibrary.

      [5] Bacha, O. I. (1999). Derivative Instruments and Islamic Finance: Some Thoughts for Reconsideration. International Journal of Islamic Financial Services, 1(1), 9-25.

      [6] Boffey, R., & Robson, G. (1995). Bank Credit Risk Management. Managerial Finance, 21(1), 66-78.

      [7] Carey, M., & Stulz, R. M. (2005). The Risks of Financial Institutions. SSRN eLibrary.

      [8] Čihák, M., & Hesse, H. (2010). Islamic Banks and Financial Stability: An Empirical Analysis. Journal of Financial Services Research, 38(2), 95-113. doi:10.1007/s10693-010-0089-0.

      [9] Coffin, B. (2009). The 2008 Financial Crisis: A Wake-Up Call for Enterprise Risk Management. Risk and Insurance Management Society, Inc. Retrieved from http//:www.community.rims.org/RIMS.

      [10] Creswell, J. W. (2007). Qualitative Inquiry and Research Design: Choosing Among Five Approaches (2nd ed.). Thousand Oaks, California: Sage Publications,Inc.

      [11] Galai, D., Ruthenberg, D., Sarnat, M., & Schreiber, B. Z. (Eds.). (1999). Risk Management and Regulation in Banking. Boston: Kluwer Academic Publishers.

      [12] Hussain, H. A., & Al-Ajmi, J. (2012). Risk Management Practices of Conventional and Islamic Banks in Bahrain. The Journal of Risk Finance, 13(3), 215-239.

      [13] Hussien, M. S. A. (2017). Risk Management in Islamic Banks: A Case Study of the Faisal Islamic Bank of Egypt. World Academy of Science, Engineering and Technology, International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 10(12), 3995-4003.

      [14] Iqbal, Z., & Mirakhor, A. (2007). An Introduction to Islamic Finance: Theory and Practice. Singapore: John Wiley & Son (Asia).

      [15] Jobst, A. (2007). Derivatives in Islamic finance. Islamic Economic Studies, 15(1), 1-33.

      [16] Jorion, P., & Khoury, S. J. (1996). Financial Risk Management Domestic and International Dimensions. Cambridge, Massachusetts: Blackwell Publishers.

      [17] Kalapodas, E., & Thomson, M. E. (2006). Credit Risk Assessment: A Challenge for Financial Institutions. IMA Journal of Management Mathematics, 17, 25-46.

      [18] Kayed, R. N., & Hassan, M. K. (2011). The Global Financial Crisis and Islamic Finance. Thunderbird International Business Review, 53(5), 551-564.

      [19] Khan, T. (2003). Credit Risk Management: A Framework for Islamic Banking. Paper presented at the Islamic Banking: Risk Management, Regulation and Supervision, Jakarta, Indonesia.

      [20] Khan, T., & Ahmed, H. (2001). Risk Management: An Analysis of Issues in Islamic Financial Industry. Occasional Paper Islamic Research and Training Institute 5. Retrieved from http://www.irti.org/irj/go/km/docs/documents/IDBDevelopments/Internet/English/IRTI/CM/downloads/Distance_Learning_Files/Risk_Management_DrTariqullah_Khan.pdf.

      [21] Makiyan, S. N. (2008). Risk Management and Challenges in Islamic Banks. Journal of Islamic Economics, Banking and Finance, 4(3), 45-54.

      [22] Mokni, R. B. S., Echchabi, A., & Rajhi, M. T. (2015). Risk Management Practiced Tools in the MENA Region: A Comparative Study between Islamic and Conventional Banks. International Journal of Business, 20(3), 261.

      [23] Obaidullah, M. (1998). Financial Engineering with Islamic Options. Islamic Economic Studies, 6(1), 73-103.

      [24] Obaidullah, M. (1999). Financial Options in Islamic Contracts: Potential Tools for Risk Management. KAU Journal of Islamic Economics, 11, 3-26.

      [25] Obaidullah, M. (2002). Islamic Risk Management. International Journal of Islamic Financial Services, 3(4), 291-311.

      [26] Oldfield, G. S., & Santomero, A. M. (1997). The Place of Risk Management in Financial Institutions. The Wharton Financial Institutions Center, 95-05-B. Retrieved from http://fic.wharton.upenn.edu/fic/papers/95/9505.pdf.

      [27] Rahman, A. A., & Shahimi, S. (2010). Credit Risk and Financing Structure of Malaysian Islamic Banks. Journal of Economic Cooperation and Development, 31(3), 83-105.

      [28] Saunders, A., & Cornett, M. M. (2006). Financial Institutions Management: A Risk Management Approach (5th Ed.). New York: McGraw-Hill Irwin.

      [29] Zakaria, R. H., & Ismail, A. G. (2008). Does Islamic banks' securitization involvement restrain their financing activity? Humanomics, 24(2), 95-109.

  • Downloads

  • How to Cite

    Najuna Misman, F., Ahmad, W., & Sufiawati Khairani, N. (2018). Risk and Islamic banks: a study on Malaysian Islamic banks. International Journal of Engineering & Technology, 7(3.35), 136-139. https://doi.org/10.14419/ijet.v7i3.35.29281