Next Article in Journal
Asymmetric Mean Reversion in Low Liquid Markets: Evidence from BRVM
Previous Article in Journal
Bitcoin at High Frequency
Article Menu

Export Article

Open AccessArticle
J. Risk Financial Manag. 2019, 12(1), 37;

Developments in Risk Management in Islamic Finance: A Review

Department of Finance, Faculty of Economics and Administration, King Abdulaziz University, Jeddah 21589, Saudi Arabia
La Trobe Business School, La Trobe University, Melbourne, VIC 3086, Australia
Department of Finance, Faculty of Business and Management, Universiti Teknologi MARA, 85000 Segamat, Johor, Malaysia
Author to whom correspondence should be addressed.
Received: 4 January 2019 / Revised: 4 February 2019 / Accepted: 12 February 2019 / Published: 20 February 2019
Full-Text   |   PDF [808 KB, uploaded 20 February 2019]   |  


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. View Full-Text
Keywords: Islamic banks; conventional banking; risk mitigation; Shariah jurisdiction Islamic banks; conventional banking; risk mitigation; Shariah jurisdiction

Graphical abstract

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

Share & Cite This Article

MDPI and ACS Style

Al Rahahleh, N.; Ishaq Bhatti, M.; Najuna Misman, F. Developments in Risk Management in Islamic Finance: A Review. J. Risk Financial Manag. 2019, 12, 37.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics



[Return to top]
J. Risk Financial Manag. EISSN 1911-8074 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top