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Year 2013, Volume: 2 Issue: 1-2, 215 - 230, 01.06.2013

Abstract

References

  • Abdul Majid, A. R., 2005. Developing Liquidity Management Instruments: The Role of International Islamic Banks. In: T. Khan, and D. Muljawan., eds., Islamic Financial Architecture: Risk Management and Financial Stability. Seminar Proceedings No. 46. Jeddah: Islamic Research and Training Institute. Pp. 123-156.
  • Abul-Rahman, Y., 2005. Islamic Instruments for Managing Liquidity. International Jour- nal of Islamic Financial Services, 1(1), pp. 34-46.
  • Ahmad, H. and Khan, T., eds., 1997. Islamic Financial Instruments for Public Sector Resource Mobilization. Seminar Proceedings. No. 39. Jeddah: Islamic Research and Training Institute and Islamic Development Bank.
  • Ahmed, O. B., 1997. Islamic Financial Instruments to Manage Short-term Excess Liquid- ity. (Research Paper No. 41). Jeddah: Islamic Research and Training Institution, Islamic Development Bank.
  • Aggarwal, R. K., and Yousef, T., 2000. Islamic Banks and Investment Financing. Journal of Money, Credit and Banking, 32(1), pp. 93-120.
  • Allen, F. and Gale, D., 2004. Competition and Financial Stability. Journal of Money, Cred- it, and Banking 36 (3), pp. 454-480.
  • Allen, F. and Santomero, A. M., 1998. The Theory of Financial Intermediation. Journal of Banking & Finance. 21 1461-1485.
  • Ali, S. S., 2004. Islamic Models of Finance and Associated Liquidity Risks. paper presented at the Conference on Monitory Sector in Iran: Structure, Performance and Chal- lenging Issues, February 2004, Tahran-Iran.
  • Basel Committee on banking Supervision. 2008. Principles for Sound Liquidity manage- ment and Supervision. Basel, Switzerland: Bank for International Settlement.
  • Berger, A. N. and Bouwman, C. H. S., 2009, Bank Liquidity Creation. Review of Financial Studies, 22(9), pp. 3779-3837.
  • Bryant, J., 1980. A Model of Reserves, Banks Runs, and Deposit Insurance. Journal of Banking and Finance, 4, 335-344.
  • Cox, S. and Thomas, A., 2005. Liquidity Management: Developing the Islamic Capital Market and Creating Liquidity. In: Abdukader Thomas, Stella Cox and B. Kraty, Structuring Islamic Finance Transactions. London: Euromoney Institution Investor PLC. pp. 171-183.
  • Cox, S. and Thomas, A., 2005. Salam. In: Abdukader Thomas, Stella Cox and B. Kraty, Structuring Islamic Finance Transactions. London: Euromoney Institution Investor Plc. pp. 93-101.
  • Dar, H. and Azmi, T. A., 2010. Global Islamic Finance Report GIFR. London, United Kingdom: Rexiter.
  • Dar, H. and Azmi, T. A., 2012. Global Islamic Finance Report GIFR. London, United Kingdom: Rexiter.
  • Diamond, D. W., 2007, Banks and Liquidity creation: A simple exposition of the Dia- mond-Dybvig Model. Economic Quarterly, 93 (2), pp. 189-200.
  • Diamond, D. W. and Dybvig, P. H., 1983, Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy, 91(3), pp. 401-19.
  • Dusuki, A. W., 2007. Commodity Murabahah Programme (CMP): An Innovative Approach to Liquidity Management. Paper presented at the 5International Islamic Finance Conference, organized by Monash University- Kuala Lumpur, 3– 4September 2007. th rd th
  • Ibrahim, Badr El Din A., 2007. Some Aspects of Liquidity of Islamic Banks in two AGCC states. In Badr El Din A. Ibrahim, Economic Co-operation in the Gulf. UK: Routledge. pp. 59-90
  • Iqbal, Z. and Mirakhor, A., 2007. An Introduction to Islamic Finance: Theory and Practice. Singapore: John Wiley & Sons (Asia) Pte Ltd.
  • Islamic Financial Service Board (IFSB), 2008. Issues in Strengthening Liquidity Manage- ment of Institutions Offering Islamic Financial Services: The Development of Islamic Money Markets.
  • Islamic Financial Service Board (IFSB), 2005. Guiding Principles of Risk Management for Institutions (Other than Insurance Institutions) Offering Only Islamic Financial Ser- vices.
  • Ismal, R., 2008. Shariah Issues in liquidity Risk Management: A Survey. Review of Islamic Economics, 12(2). pp. 45-67
  • Farhani, Y. G. and Dastan, M., 2013. Analysis of Islamic Banks’ Financing and Economic Growth: A Panel Co-integration Approach. International Journal of Islamic and middle Eastern Finance and Management. 6 (2) pp. 156-172.
  • Kahf, M., 2000. Treatment of Excess Liquidity in the Arab Gambian Islamic Bank. Avail- able at <URL: http://www.kahf.net/index.html >, Access Date: 12th August 2012.
  • Khan, I., 2005. Liquidity Management of Islamic Financial Institutions in the UAE. Paper presented at the Seminar on Liquidity Management in Islamic Financial Institu- tions, Central Bank of UAE on 10th December 2005, Abu Dhabi, UAE.
  • Khan, F., 2010. How ‘Islamic’ is Islamic Banking. Journal of Economic Behavior and Or- ganization, 79(3), pp. 805-820.
  • Khan, T. and Ahmad, H., 2001. Risk Management; An Analysis of Issues in the Islamic Fi- nancial Industry. Jeddah: Islamic Development Bank.
  • Maroun, Y. S., 2002. Liquidity Management and Trade Financing. In: S. Archer and A. Abdel Karim, eds. Islamic Finance; Innovation and Growth. London: Euromoney Books. pp. 163-175.
  • van Greuning, H., 2009. Risks Associated with Liquidity in the Islamic Financial Services Industrry (IIFS). Paper presented at the third Islamic Financial Forum: The Euro- pean Challenge on 4th March 2009, Paris, France.
  • van Greuning, H. and Iqbal, Z., 2008. Risk Analysis for Islamic Banking. Washington: the International Bank for Reconstruction and Development/The World Bank.

Liquidity Risk Management in Islamic Banks: A Survey

Year 2013, Volume: 2 Issue: 1-2, 215 - 230, 01.06.2013

Abstract

One of the most important functions of banks is the transformation of maturities, i.e. the ability to obtain funding from short term deposits so as to finance loans over a longer term. As a result of such behaviour, banks are exposed to liquidity risk. Liquidity risk occurs when a bank is unable to cover its financial obligation when it is due without bearing any costs. Hence, liquidity risk management can be defined as a regular process to guarantee that the expected and unexpected cash needs can be met at reasonable costs. While, on the liability side, liquidity risk arises when depositors withdraw their money at once or in large amounts, on the asset side, banks are vulnerable to liquidity risk if the demand in loans increases. Hence, this research provides an overview of the authentic principles of the Shari’ah and the main guidelines of Islamic finance with relation to liquidity risk. In addition, attention is focused on the undertaking of specific techniques and policies as well as the initiation special types of supervision to provide high-quality services so as to satisfy the spiritual and objectives of Islamic finance and subsequently to develop a better understanding of liquidity risk management

References

  • Abdul Majid, A. R., 2005. Developing Liquidity Management Instruments: The Role of International Islamic Banks. In: T. Khan, and D. Muljawan., eds., Islamic Financial Architecture: Risk Management and Financial Stability. Seminar Proceedings No. 46. Jeddah: Islamic Research and Training Institute. Pp. 123-156.
  • Abul-Rahman, Y., 2005. Islamic Instruments for Managing Liquidity. International Jour- nal of Islamic Financial Services, 1(1), pp. 34-46.
  • Ahmad, H. and Khan, T., eds., 1997. Islamic Financial Instruments for Public Sector Resource Mobilization. Seminar Proceedings. No. 39. Jeddah: Islamic Research and Training Institute and Islamic Development Bank.
  • Ahmed, O. B., 1997. Islamic Financial Instruments to Manage Short-term Excess Liquid- ity. (Research Paper No. 41). Jeddah: Islamic Research and Training Institution, Islamic Development Bank.
  • Aggarwal, R. K., and Yousef, T., 2000. Islamic Banks and Investment Financing. Journal of Money, Credit and Banking, 32(1), pp. 93-120.
  • Allen, F. and Gale, D., 2004. Competition and Financial Stability. Journal of Money, Cred- it, and Banking 36 (3), pp. 454-480.
  • Allen, F. and Santomero, A. M., 1998. The Theory of Financial Intermediation. Journal of Banking & Finance. 21 1461-1485.
  • Ali, S. S., 2004. Islamic Models of Finance and Associated Liquidity Risks. paper presented at the Conference on Monitory Sector in Iran: Structure, Performance and Chal- lenging Issues, February 2004, Tahran-Iran.
  • Basel Committee on banking Supervision. 2008. Principles for Sound Liquidity manage- ment and Supervision. Basel, Switzerland: Bank for International Settlement.
  • Berger, A. N. and Bouwman, C. H. S., 2009, Bank Liquidity Creation. Review of Financial Studies, 22(9), pp. 3779-3837.
  • Bryant, J., 1980. A Model of Reserves, Banks Runs, and Deposit Insurance. Journal of Banking and Finance, 4, 335-344.
  • Cox, S. and Thomas, A., 2005. Liquidity Management: Developing the Islamic Capital Market and Creating Liquidity. In: Abdukader Thomas, Stella Cox and B. Kraty, Structuring Islamic Finance Transactions. London: Euromoney Institution Investor PLC. pp. 171-183.
  • Cox, S. and Thomas, A., 2005. Salam. In: Abdukader Thomas, Stella Cox and B. Kraty, Structuring Islamic Finance Transactions. London: Euromoney Institution Investor Plc. pp. 93-101.
  • Dar, H. and Azmi, T. A., 2010. Global Islamic Finance Report GIFR. London, United Kingdom: Rexiter.
  • Dar, H. and Azmi, T. A., 2012. Global Islamic Finance Report GIFR. London, United Kingdom: Rexiter.
  • Diamond, D. W., 2007, Banks and Liquidity creation: A simple exposition of the Dia- mond-Dybvig Model. Economic Quarterly, 93 (2), pp. 189-200.
  • Diamond, D. W. and Dybvig, P. H., 1983, Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy, 91(3), pp. 401-19.
  • Dusuki, A. W., 2007. Commodity Murabahah Programme (CMP): An Innovative Approach to Liquidity Management. Paper presented at the 5International Islamic Finance Conference, organized by Monash University- Kuala Lumpur, 3– 4September 2007. th rd th
  • Ibrahim, Badr El Din A., 2007. Some Aspects of Liquidity of Islamic Banks in two AGCC states. In Badr El Din A. Ibrahim, Economic Co-operation in the Gulf. UK: Routledge. pp. 59-90
  • Iqbal, Z. and Mirakhor, A., 2007. An Introduction to Islamic Finance: Theory and Practice. Singapore: John Wiley & Sons (Asia) Pte Ltd.
  • Islamic Financial Service Board (IFSB), 2008. Issues in Strengthening Liquidity Manage- ment of Institutions Offering Islamic Financial Services: The Development of Islamic Money Markets.
  • Islamic Financial Service Board (IFSB), 2005. Guiding Principles of Risk Management for Institutions (Other than Insurance Institutions) Offering Only Islamic Financial Ser- vices.
  • Ismal, R., 2008. Shariah Issues in liquidity Risk Management: A Survey. Review of Islamic Economics, 12(2). pp. 45-67
  • Farhani, Y. G. and Dastan, M., 2013. Analysis of Islamic Banks’ Financing and Economic Growth: A Panel Co-integration Approach. International Journal of Islamic and middle Eastern Finance and Management. 6 (2) pp. 156-172.
  • Kahf, M., 2000. Treatment of Excess Liquidity in the Arab Gambian Islamic Bank. Avail- able at <URL: http://www.kahf.net/index.html >, Access Date: 12th August 2012.
  • Khan, I., 2005. Liquidity Management of Islamic Financial Institutions in the UAE. Paper presented at the Seminar on Liquidity Management in Islamic Financial Institu- tions, Central Bank of UAE on 10th December 2005, Abu Dhabi, UAE.
  • Khan, F., 2010. How ‘Islamic’ is Islamic Banking. Journal of Economic Behavior and Or- ganization, 79(3), pp. 805-820.
  • Khan, T. and Ahmad, H., 2001. Risk Management; An Analysis of Issues in the Islamic Fi- nancial Industry. Jeddah: Islamic Development Bank.
  • Maroun, Y. S., 2002. Liquidity Management and Trade Financing. In: S. Archer and A. Abdel Karim, eds. Islamic Finance; Innovation and Growth. London: Euromoney Books. pp. 163-175.
  • van Greuning, H., 2009. Risks Associated with Liquidity in the Islamic Financial Services Industrry (IIFS). Paper presented at the third Islamic Financial Forum: The Euro- pean Challenge on 4th March 2009, Paris, France.
  • van Greuning, H. and Iqbal, Z., 2008. Risk Analysis for Islamic Banking. Washington: the International Bank for Reconstruction and Development/The World Bank.
There are 31 citations in total.

Details

Other ID JA86PF26SY
Journal Section Research Article
Authors

Sabri Mohammad This is me

Publication Date June 1, 2013
Published in Issue Year 2013 Volume: 2 Issue: 1-2

Cite

APA Mohammad, S. (2013). Liquidity Risk Management in Islamic Banks: A Survey. Afro Eurasian Studies, 2(1-2), 215-230.

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