A comparative study of Islamic and conventional banks’ risk management practices: empirical evidence from Pakistan

Rehman, Asma; Benamraoui, Abdelhafid; Dad, Aasim Munir

doi:10.1057/s41261-017-0046-z

Cited by 14 publications

(20 citation statements)

References 25 publications

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“…The study findings also relate to the importance of supervisors assessing the adequacy of a bank's liquidity risk management framework and its level of liquidity, and suggest steps that supervisors should take if these are deemed inadequate. This is in line with the study by [18].…”

Section: A) Assessment Of Fraud Risksupporting

confidence: 93%

Effect of Risk Management on Financial Stability of Micro Finance Institutions in Rwanda

Bashaija¹

2018

EBM

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The study sought to establish the effect of risk management on financial stability of micro finance institutions in Rwanda. In Rwandan perspective, financial system is still relatively shallow and thus potential impact on financial stability. The researcher used Theory of Corporate Risk Management. Research Design, Population, Sampling Frame and Size, Data Collection Instruments, Data Collection Procedure, Pilot Test, Reliability of the Instrument, Validity, and Data Processing and analysis were used during the study. Data analysis was descriptive statistics and inferential statistics using Statistical Packages for Social Sciences (SPSS) version 21. SPSS produced frequencies, descriptive and inferential statistics which was used to derive conclusions and generalizations regarding the population. The analysis of variance (ANOVA) was checked to reveal the overall model of significance. A critical p value of 0.05 was used to determine whether the overall model is significant or not. The results were indicated that as per the variable. Risk management has a positive and significant effect on compliance and financial stability on Financial Stability of MFI. The study recommended that there must be a policy for the MFI to try to stick to one bank in order to create a good relationship with the bank. The study also recommends that the government of Rwandans should timely review the timelines set for completing their full risk-based assessment of the effectiveness of their financial reporting controls and for addressing identified gaps and weaknesses, to ensure that they are timely reported.

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Section: A) Assessment Of Fraud Risksupporting

confidence: 93%

Effect of Risk Management on Financial Stability of Micro Finance Institutions in Rwanda

Bashaija¹

2018

EBM

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“…To collect its data, this study used a two-part questionnaire. It was adopted from an original developed by Al-Tamimi and Al-Mazrooei (2007), and has been updated and used by many other studies, such as Abul-Hassan (2009); Abu Hussain and Al-Ajmi (2012); Abdul Rahman et al (2014); Abbas et al (2018); Rehman et al (2018). Since so little data about RMPs have been published, the direct assessment of the views of key players in response to a questionnaire was thought to be a relevant way of capturing the dynamism of RMPs, given the main objective of the current study to assess and compare RMPs in IBs and CBs.…”

Section: Methodsmentioning

confidence: 99%

Risk and risk management practices

Elgharbawy

2020

JIABR

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Purpose This study aims to compare types and levels of risk and risk management practices (RMPs) including the recognition, identification, assessment, analysis, monitoring and control of risk in both Islamic and conventional banks. Design/methodology/approach A questionnaire survey was conducted among the Islamic and conventional banks in Qatar, together with an analysis of archival data extracted from the Thomson Reuters Eikon database for the period 2009-2018. Data were analysed using descriptive statistics, ANOVA and regression analysis. Findings Islamic banks encounter unique types and levels of risk that are not encountered by conventional banks. In Islamic banks, risks such as those of operation and Sharia non-compliance are perceived to be higher, while in conventional banks other risks such as those of credit and insolvency are higher; other risks, for example, liquidity risk, are faced by both. RMPs are determined by understanding risk and risk management, risk identification, risk monitoring and control and credit risk analysis, but not by risk assessment and analysis. However, the RMPs of the two types of bank are not significantly different, except in the analysis of credit risk. Research limitations/implications The study contributes to the debate in the literature by developing a better understanding of the dynamism of risk management in Qatari banks, which can be extended to similar contexts in the region. However, the relatively small sample size in only one country limits the possibility of generalizing the findings. The survey methodology is based on the perception of bankers rather than their actual actions and does not provide in-depth analysis for each type of risk, especially credit risk. However, using archival data, in addition to those from the survey, minimises the bias that would result from depending on one source of data. Practical implications The study provides valuable insights into the different types and levels of risk, as well as the RMPs in Islamic and conventional banks, which can help in guiding the future development and regulation of risk management in the banking sector of Qatar and its region. Originality/value The study helps to explain the mixed results of previous studies that compare types and levels of risk and RMPs in Islamic and conventional banks. Using different types of data and analysis, it provides evidence from one of the fastest growing economies in the world. It also addresses the concerns over RMPs in banks since the global financial crisis.

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“…According to Abdymomunov et al, (2017) financial institutions with a weak risk management procedure experience higher and more volatile operational losses whereas effective operational risk management is necessary for the success and existence of the bank, either Islamic or conventional, and its importance is increasing over time, particularly after the recent crises and the recession (Rehman, Benamraoui, & Dad, 2018). The associated losses related to this risk i:e operational risk range from rogue traders, fraud, settlement failure, poor accounting, miss selling and lapses in financial control.…”

Section: Introductionmentioning

confidence: 99%

“…2012;Rehman et al, 2018). It is therefore, vital for banks that operate complex businesses to establish efficient risk management processes in order to avoid heavy losses (Rehman et. al., 2018).…”

Section: Introductionmentioning

confidence: 99%

Securing Tomorrow: An Operational Risk Capital Cushion Perspective

Durraani¹

2021

PSSR

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This paper aims to conduct an in-depth analysis of commercial banks of Pakistan dealing operational risk, whose internal frameworks have been in place but in its early stages and lack consistency to provide the desired level of assurance to both management and regulators. Additionally, the paper is driven by the need of exploring and assessing the operational risk capital cushion in the light of Basel recommendations to pave way for further studies crucial for the survival of banks and that too in the context of a developing country which is rare in literature. Keeping in view of exploratory nature of the research, the strategy falling in the realm of qualitative research has used primary data from face to face interviews of risk managers analysed with the help of thematic analysis. The study finds a consistency considering the recommendations of Basel II of using only "basic indicator approach" for calculating operational risk cushion in Pakistan whereas Basel III recommendation of having a standardize approach to use across all banks is still a long road ahead while managers are unaware of the numbers their banks were keeping as a capital cushion which itself is a big risk.

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A comparative study of Islamic and conventional banks’ risk management practices: empirical evidence from Pakistan

Cited by 14 publications

References 25 publications

Effect of Risk Management on Financial Stability of Micro Finance Institutions in Rwanda

Effect of Risk Management on Financial Stability of Micro Finance Institutions in Rwanda

Risk and risk management practices

Securing Tomorrow: An Operational Risk Capital Cushion Perspective

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