Does One Size Fits All? - Applying Conventional Credit Risk Mitigation to Islamic Financial Institutions
The purpose of this paper is to examine the credit risk mitigation in Islamic Financial Institutions (IFIs). Currently, shariah compliant financing in Malaysia are still dominated by the concept of Bai’ Bithaman Ajil (BBA), Ijarah Thumma Al Bai and Murabahah. These sale-based approaches allow conventional credit risk mitigation to be utilized by IFIs. However, with the emergence of equity-based approach products like Musharakah/Mudharabah business financing and Musharakah Mutanaqisah Home Financing means IFIs need to enhance their perspective of credit risk which means the conventional method is not enough. Thus, this paper illustrates the concept of credit risk and differentiates them with capital impairment risk in line with the risk sharing responsibility of IFIs. This paper suggests some credit risk mitigation techniques to help IFIs create a niche for themselves in the financial market.
|Date of creation:||Dec 2012|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Khan, Tariqullah & Ahmed, Habib, 2001.
"Risk Management: An Analysis of Issues in Islamic Financial Industry (Occasional Paper),"
2001, The Islamic Research and Teaching Institute (IRTI).
- Khan, Tariqullah & Ahmed, Habib, 2001. "Risk Management: An Analysis of Issues in Islamic Financial Industry (Occasional Papers)," Occasional Papers 91, The Islamic Research and Teaching Institute (IRTI).
- Weber, Rachel & Bhatta, Saurav Dev & Merriman, David, 2007. "Spillovers from tax increment financing districts: Implications for housing price appreciation," Regional Science and Urban Economics, Elsevier, vol. 37(2), pages 259-281, March.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:47774. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.