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The Impact of Credit Risk Mitigation on the Profits of Investment Deposits in Islamic Banks

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Islamic Finance

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

Abstract

Islamic banks’ investment decisions are more challenging due to Shariah compliance, regulation, and market competition. This study explores the credit risks and what has been put into practice to mitigate these risks in Islamic banks. Eight expert interviews were conducted with people from the field of Jordanian Islamic banks, using a qualitative approach.

The results highlight the distinctive features of the Islamic bank present challenges and opportunities in the process of mitigating credit risk, the critical challenges that arise from the process of lending and credit control strategies. The findings emphasize the positive impact of self-constructed reciprocal insurance within Islamic banks. The main finding stresses that the client’s awareness of the uniqueness of Islamic banks’ features plays a key role in the credit grant decision.

This study contributes to the literature on Islamic banking. Among a few studies, this study explores the procedures used to mitigate credit risks, from the perspective of Islamic banking credit experts. Policymakers and Islamic banks must spread religious and cultural awareness about Islamic financial transactions to address customers’ misconceptions.

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Author information

Authors and Affiliations

  1. Department of Accounting, Business School, The Hashemite University, Zarqa, Jordan

    Fadi Shehab Shiyyab

  2. Middle East University, Amman, Jordan

    Amer Qasem Morshed

Authors
  1. Fadi Shehab Shiyyab
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  2. Amer Qasem Morshed
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Corresponding author

Correspondence to Fadi Shehab Shiyyab .

Editor information

Editors and Affiliations

  1. Department of Finance, University of Sousse-Tunisia and University of Salamanca-Spain, Monastir, Tunisia

    Nadia Mansour

  2. Faculty of Law, University of Salamanca, Salamanca, Spain

    Lorenzo Bujosa

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Shiyyab, F.S., Morshed, A.Q. (2024). The Impact of Credit Risk Mitigation on the Profits of Investment Deposits in Islamic Banks. In: Mansour, N., Bujosa, L. (eds) Islamic Finance. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-031-48770-5_11

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