Challenges For Islamic Banks

Ch every(prenominal)enges for Muslim Banks The unique characteristics of Muslim banking give rise to a set of challenges that have to be addressed by Islamic banks. These include: Establishing appropriate luck and fluidity focussing techniques Achieving lucid sharia supervision Managing the talent pool Addressing legal and taxation restrictions Establishing appropriate risk and liquidity watchfulness 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 govern not purchase the vehicle from the bank even though he commit¬ted to do so. The less standard¬ized the goods financed through and through 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 i nventory. As a result, Islamic banks need to evaluate their risk direction techniques and deploy appropriate capabilities to counter or mitigate risks. formulaic risk manage¬ment techniques and instruments are not richy 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 much(prenominal) as that of retailersneeds to be transferred and applied accordingly. A study 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 funds market instruments are in short run and commodity-based bump murabahah transactions can only be regarded as an lag solution. A similar problem exists on the long financing side, where the issuance of sukuk is the only option available nevertheless requires an implicit in(p) asset on which to...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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