Risk Management in Islamic and Conventional Banks: A Differential Analysis

Journal of Independent Studies and Research, Vol. 7, No. 2, pp. 67-70, July 2009

13 Pages Posted: 3 Jan 2010

See all articles by Amanat Ali Jalbani

Amanat Ali Jalbani

Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST)

Salman Ahmed Ahmed Shaikh

Islamic Economics Project

Date Written: July 2009

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

JEL Classification: G3, G32, G21

Suggested Citation

Jalbani, Amanat Ali and Shaikh, Salman Ahmed, Risk Management in Islamic and Conventional Banks: A Differential Analysis (July 2009). Journal of Independent Studies and Research, Vol. 7, No. 2, pp. 67-70, July 2009, Available at SSRN: https://ssrn.com/abstract=1530393

Amanat Ali Jalbani

Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST) ( email )

90 and 100 Clifton
Karachi, ISLAMABAD 75600
Pakistan

Salman Ahmed Shaikh (Contact Author)

Islamic Economics Project ( email )

Karachi, Sindh
Pakistan

HOME PAGE: http://www.islamiceconomicsproject.com

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