Challenges For Islamic Banks

Ch eachenges for Muslim Banks The unique characteristics of Moslem 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 invariable sharia supervision Managing the talent pool Addressing legal and tax income restrictions Establishing appropriate risk and liquidity oversight techniques: The risk profiles of Islamic finan¬cial institutions differ from those of their conventional counterparts because of some of the Islamic finance techniques. For example, in an auto murabahah transaction, there is a risk that the customer align 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 resul t, Islamic banks need to evaluate their risk instruction techniques and deploy appropriate capabilities to counter or mitigate risks. formulaic risk manage¬ment techniques and instruments are not wide-cuty fitted for all Islamic banks.

When an Islamic bank engages in the mutajarah business, for example, risk associ¬ated with dimension 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(ip) challenge facing Islamic banks is the absence of short-run liquidity management and longer-term refinancing instru ments. As a result, asset indebtedness manag! ement is becoming a real problem. On the short-term side, sharia-compliant gold market instruments are in short run and commodity-based stamp out murabahah transactions can only be regarded as an temporary solution. A similar problem exists on the long financing side, where the issuance of sukuk is the only option available nevertheless requires an underlie asset on which to...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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