Risk management for islamic banks

Abstract

The eight chaptered book entitled “Risk Management for Islamic Banks” is kind of a review of literature on the subject of risk management in Banks, particularly Islamic banks. Chapter 5 and chapter 6 are the main parts of the book. In chapter 5, the book supposedly introduces various risk mitigation methods for Islamic banks. However, this chapter is primarily a review of existing literature. In chapter 6, the book supposedly demonstrates how to adopt an integrated risk management framework to fit Islamic banks, by presenting a hypothetical case of an Islamic bank and adopting suggested risk management procedures. While developing the argument, the book assumes, with reference to the literature, that Islamic banks’ business models and products are homogenous. While such assumptions are made in conventional economics and finance and any results can be derived with these assumptions, they are not deemed scientific and acceptable in Islamic economics and finance which looks for reality instead not assumptions in order to have scientific inferences. For example, conventional economics and finance assumes that Riba is same as mark-upin trade transactions and such an assumption is reprimanded in the Holy Qur’an.