Enhancing Islamic Finance through Risk Benchmarking
The Capco Institute Journal of Financial Transformation, No. 38 (October 2013), pp.17-34
21 Pages Posted: 9 Oct 2013 Last revised: 17 Jul 2014
Date Written: October 1, 2013
This article argues that the development of a new specialist "risk benchmarking framework" for public and private Islamic BFIs operating regionally (excluding central banks), is the first and necessary step towards empirically proving a claim of Islamic finance superiority right. The development of a collaborative risk benchmarking framework for Western and Islamic banks and financial institutions (BFIs) would contribute to the enhancement of Islamic finance by: (i) contributing to enhancing the legitimacy of Islamic finance; (ii) enhancing risk management systems and practices in Islamic BFIs; and (iii) affording realistic opportunities for the offering of new Shari'ah compliant Islamic finance products. The article provides a high level analysis of the theoretical Islamic finance risk benchmarking operational framework.
Keywords: Islamic finance; Shari'ah; risk benchmarking; financial risk; banks and financial institutions; murabaha; mudaraba; musharaka; sukuk; ijara
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