Liquidity Management Practices in Islamic Banking

• Authors: Iwona Sobol

Title variants

PL

Sposoby zarządzania płynnością w bankach islamskich

• Languages of publication: EN

Abstracts

EN

In the last few decades the increasing significance of Islamic banking has been observed. A distinctive feature of Islamic banks is the obligation to conduct operations in accordance with principles of sharia, which is the religious law of Muslims. The prohibition of usury (arab. riba), understood as any sort of increase over the principal amount, is considered to be the most fundamental sharia principle that Islamic banks must follow. As a result transactions conducted by Islamic banks cannot be based on interest. This principle applies also to money market operations which are essential for managing the bank’s liquidity. Islamic banks create their own instruments such as commodity murabaha or ijara sukuk to manage liquidity risk. Those instruments, however, have many drawbacks. First of all, they are hardly traded in the secondary market. Secondly, they are not universally approved by Islamic scholars which results in inability to trade them across the countries.

Keywords

EN

liquidity risk; Islamic banks; usury

• Publisher: Wydział Zarządzania - Uniwersytet Gdański
• Journal: Zarządzanie i Finanse
• Year: 2013
• Volume: 2
• Issue: 1
• Pages: 566-576

Contributors

author

Iwona Sobol

• Dr, Instytut Handlu Zagranicznego, Wydział Ekonomiczny, Uniwersytet Gdański, ul. Armii Krajowej 119/121, 81-824 Sopot

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