RISK MANAGEMENT IN ISLAMIC BANKS AND ITS TECHNIQUES

Abstract

The abstract of risk management of Islamic banking an its tecneiqes,managing the risk is the most important aspect of the commercial finance. It is a tool to minimize the chance of any loss which can be occurring in the near future due to occurred due to uncertainty in the environment and in the economic structure of the count. There are two types of risk financial risk and business risk. On the other hand, these risks are further categorized into controllable and uncontrollable risk. The financial crises of 2007 has duly changed the overall picture of the financial industry now Western banks and financial companies are establishing their own Islamic banking networks and is compelling more research in order to unlock the potential of the industry. It is a tool which is beneficial for not only an investor but for the companies and the Governments too. Islam identifies the risk and is on the single opinion to avoid transaction in which a certain amount of interest is involved because it is the root of uncertainty which in future creates a number of problems. Islamic system is defined by the Holy Book and is governed by the principles of Sharia. A large number of western banks are also implementing the Islamic risk management tools. A number of Western banks like (ABN Amro, Societe Generale', 'Oh Ji En', 'Jay. Pi. Morgan Chase Manhattan'”) for a long time have in their structure units ('window'), which provide Islamic banking services. In July 2003, two in the UK International Bank, HSBC and United National Bank, have begun offering their clients Islamic banking products for mortgage lending. A U.S. bank Citibank ” a long-term cooperation with the Islamic banking institutions, investing about $ 1 billion to the specialized Islamic funds. In 1997, ” Citibank in Bahrain has established its authoritative department 'City' Islamic Investment Bank with a capital of 20 million dollars. According to Citibank ” growth of Islamic banking sector ranged from 10 to 15% per year. The Islamic banks are heading towards the western as well, as other markets to explore business in Islamic terms.