The purpose of this study is to review recent developments pertaining to risk management in Islamic banking and finance literature. The study explores the fundamental features of risks associated with Islamic banks (IBs) as compared to those associated with conventional banks (CBs) in order to determine the extent to which IBs engage in effective risk mitigation. The study includes a consideration of the major studies in which the fundamental features of Islamic banks and finance (IBF) and the main characteristics of risk management in IBs are analyzed in comparison with those of CBs. Specifically, these two kinds of banks are compared in relation to the types of risks faced, the characteristics of those risks, and the nature and extent of exposure to those risks. A tabular methodology approach is used in concert with a comparative literature review approach for the analysis. The results show that there is weak support for Shariah-based product development due to the lack of risk mitigation expertise in IBs. The conclusion presented is that in comparison with CBs, IBs are more risk-sensitive due to the nature of their products, contract structure, legal costing, governance practices, and liquidity infrastructure. Furthermore, the determinants of the credit risk of Islamic banks in Malaysia (MIBs) are examined. Overall, bank capital and financing expansion have a significant negative impact on the credit risk level of IBs in Malaysia.
In less than a decade, the Islamic Banking (IB) industry has become an essential part of the global financial system. During the last ten years, the IB industry has witnessed changes in economic conditions and proved to be resilient during the periods of financial crisis. This paper aims to examine the important issues related to credit risk in selected Islamic banks in nine countries from Association of South East Asian Nations (ASEAN) and Gulf Cooperation Council (GCC) regions. It employs the generalized least squares panel data regression, to estimate the ratio of non-performance financing to total financing as dependent variables and bank specific variables (BSV) to determine the credit risk. It uses 12 years of unbalanced panel data from 40 different Islamic banks. The overall findings show that financing quality has a significant positive effect on credit risk. It is observed that the larger IBs owned more assets with lower credit risk compared to smaller banks. The bank’s age is also an important factor influencing the credit risk level. Moreover, regulatory capital significantly reduces the credit risk exposure adherence to the minimum regulatory capital requirements which help IBs to manage their credit risk exposures. It was also observed that IBs were not affected by the global financial crisis due to less credit risk compared to the conventional banks.
The 2018 Malaysia general election has marked a new history for the Malaysia political structure. After more than 60 years Barisan Nasional ruling the country, in the 2018 general election Barisan Nasional lose the game to the Pakatan Harapan. The results of the 14th general election has caused a shock not only to political arena but also to the Malaysian financial market. Therefore, this paper aims to investigate if there is any significant effect of 14th Malaysia general election on the Malaysia financial market specifically the stock market. Results from the statistical analysis reveal that there are significant changes in the Malaysia stock market performance after the 14th general election.
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