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Credit Risk in Islamic Banking

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  • Acu Kusnandar

Abstract

The application of sharia principles in banking, which does not involve the elements of interest (riba), betting (qimar), and uncertainty (gharar) is unique and draws attention, resulting in an increase in popularity of this type of banking. Financing products have also emerged with a variety of services. Although Islamic banking does not involve those three elements, it is still faced with the risk of disbursed financing. This issue is important to observe considering its relationship with growth and competitiveness in the banking industry. Credit risk that arises can be caused by two factors, including unsystematic and systematic factors or those that cannot be eliminated or controlled. Several previous studies have described the elements that can put a bank’s credit at risk, particularly in the case of Islamic banking. Therefore, this research using a literature study aimed to classify factors that can indicate credit risk, both systematic and unsystematic in Islamic banking.

Suggested Citation

  • Acu Kusnandar, 2022. "Credit Risk in Islamic Banking," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 11(3), pages 21-26, August.
    • Handle: RePEc:rbs:ijfbss:v:11:y:2022:i:3:id:1547
    DOI: 10.20525/ijfbs.v11i3.1547
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    References listed on IDEAS

    as
    1. Sudarso Kaderi Wiryono & Kharisya Ayu Effendi, 2018. "Islamic Bank Credit Risk: Macroeconomic and Bank Specific Factors," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 53-62.
    2. Kharisya Ayu Effendi & Rozmita Dewi Yuniarti, 2018. "Credit Risk And Macroeconomics Of Islamic Banking In Indonesia," Journal of Smart Economic Growth, , vol. 3(1), pages 45-56, Juin.
    3. Zeyneb Hafsa Orhan Astrom, 2013. "Credit risk management pertaining to profit and loss sharing instruments in Islamic banking," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 11(1), pages 80-91, June.
    4. Mohamed Ali Elgari, 2003. "Credit Risk In Islamic Banking And Finance," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 10, pages 2-25.
    5. Waeibrorheem Waemustafa & Suriani Sukri, 2015. "Bank Specific and Macroeconomics Dynamic Determinants of Credit Risk in Islamic Banks and Conventional Banks," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 5(2), pages 476-481.
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