State of Liquidity Management in Islamic Financial Institutions

Ali, Salman Syed

doi:10.12816/0000240

Cited by 43 publications

(46 citation statements)

References 5 publications

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“…This is also known as funding or financing liquidity risk. Another reason is due to sale of assets also known as trading or asset liquidity risk (Ali, 2013). …”

Section: Sources Of Liquidity Riskmentioning

confidence: 99%

“…Additionally, there are three other sources of liquidity risks with respect to Islamic banks such as i) contractual forms available to Islamic banks, ii) Shariah restriction on sale of debt and iii) financial infrastructure deficiency (Ahmed, 2005;Ali, 2013;Iqbal & Molyneux, 2005). We are going to elaborate these three sources in the following sections.…”

Section: Sources Of Liquidity Riskmentioning

confidence: 99%

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The mitigation of liquidity risk in Islamic banking operations

Bello

Hasan

Saiti

2017

Banks and Bank Systems

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The purpose of this paper is to discuss the issues and challenges of liquidity risk management in Islamic banks. At the same time, the authors are going to identify the sources of liquidity risk in Islamic banks and the common instruments used to mitigate liquidity mismatches in both sides of their balance sheets. The study is a qualitative study that uses secondary sources of data to describe and analyze risk mitigation in the Islamic banking context. Data were collected from libraries by referring to books, journals from both online and offline sources. The research objectives were addressed by critically analysing various issues from both the Islamic principles and contemporary applications. The authors found that Islamic liquidity management is an important building block for stable and efficient banking. Even though there are several attempts, for example, i) organized tawarruq (commodity murabahah), ii) salam sukuk and iii) short-term ijarah sukuk, to find solutions to the incessant problems of liquidity faced by majority of Islamic banks, there are still several underlying problems such as i) in terms of deficiency in infrastructure especially in countries where Islamic finance is still at an early stage, ii) lack of hedging instruments and iii) Shariah restrictions on some instruments. Regulatory bodies should come up with more innovative practices of Islamic liquidity management to solve unresolved theoretical issues and also meeting market requirements for liquidity

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“…This is also known as funding or financing liquidity risk. Another reason is due to sale of assets also known as trading or asset liquidity risk (Ali, 2013). …”

Section: Sources Of Liquidity Riskmentioning

confidence: 99%

Section: Sources Of Liquidity Riskmentioning

confidence: 99%

The mitigation of liquidity risk in Islamic banking operations

Bello

Hasan

Saiti

2017

Banks and Bank Systems

View full text Add to dashboard Cite

show abstract

“…It is listed on the balance sheet of the asset side that is named placement with another bank (Mokhtar et al, 2006). A bank can place some of its collected funds into another bank to anticipate liquidity shortage (Ali, 2013 andKhan, 2010). When a banks keep its money on hand in form of cash, the bank has to pay saving interest to the depositors (Mokhtar et al, 2006 andJuoro, 2008).…”

Section: Placement With Banks and Other Institutionsmentioning

confidence: 99%

“…When a banks keep its money on hand in form of cash, the bank has to pay saving interest to the depositors (Mokhtar et al, 2006 andJuoro, 2008). When the collected money put on other banks, the bank can earn some money and even in a certain condition, the funds can be taken immediately in the use to buffer liquidity shortage (Ali, 2013;Gupta &Jain, 2004 andNuswantara, 2013). So, the best decision should be made is to consider some money on hand to anticipate liquidity demand in short time, and putting other some money to earn saving interest that is used to pay the cost of interest to depositors (Ali, 2013).…”

Section: Placement With Banks and Other Institutionsmentioning

confidence: 99%

“…When the collected money put on other banks, the bank can earn some money and even in a certain condition, the funds can be taken immediately in the use to buffer liquidity shortage (Ali, 2013;Gupta &Jain, 2004 andNuswantara, 2013). So, the best decision should be made is to consider some money on hand to anticipate liquidity demand in short time, and putting other some money to earn saving interest that is used to pay the cost of interest to depositors (Ali, 2013). Logically, the relationship between placement with other banks and financing is available (Gupta &Jain, 2004 andMuda et al, 2013).…”

Section: Placement With Banks and Other Institutionsmentioning

confidence: 99%

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