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Risk Management in Islamic and Conventional Banks: A Differential Analysis

Salman Ahmed Shaikh () and Amanat Jalbani

MPRA Paper from University Library of Munich, Germany

Abstract: Islamic banking is interest-free banking which makes it necessary for Islamic banks to take active part in the operations of the business, i.e. share profits as well as losses. Banks including Islamic banks prefer to take minimum risk. On the surface, it may seem that Islamic banks face more risk and hence, will have more volatile or even negative returns on their assets. This paper analyzes the risk management procedures of Islamic banks by giving a differential analysis of risk management discussing only the unique characteristics of risk management in Islamic Banking. The usual credit assessment procedures and BASEL are not discussed. This paper looks at the comparative performance of Islamic banks and conventional banks by using ROE as the benchmark.

Keywords: Risk management; commercial banking; Islamic banking; price risk; Risk mitigation (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2008-12, Revised 2009-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Journal of Independent Studies and Research 2.7(2009): pp. 67-79

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