An Analysis of the Various Types of Risks that Islamic Banking Products Are Exposed To

Abstract

In fact, involvement of risk in the process of businesses occupies an indispensable status. Risk, in the banking sector specifically, that is believed to be one of the most rigorously regulated sectors, possesses an instrumental role. In the banking and financial sectors, certain amount of risk is deemed to be instrumental for the purpose of business itself, as the same entails the prospects and opportunities of profit and reward (Hefferen 1996; Little 2011; Allen and Santomero 1997). however, the nature of risks in most of the Islamic banking products is different from that of conventional in many respects. The point of divergence in terms of risk-exposures to both institutions’ products is marked by the difference in their respective laws of contracts.

Keywords: Risk, banking products, financial reward