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GLOBAL:
The World Bank and Bahrain’s Al Baraka Banking Group have embarked on a
landmark research partnership aiming at the advancement of the global
Islamic banking industry. With preliminary findings expected to be
available in the first quarter of 2015, the collaboration will involve
a planned series of research projects.
The
first initiative begins with a study examining the risk management
challenges faced by Islamic banks, focusing on Mudarabah and Musharakah
transactions under the profit-and-loss-sharing system. According to
Abayomi Alawode, the head of Islamic finance at the World Bank,
preparing the fundamentals for this area is the most pressing challenge
facing the industry today.
“After
a series of discussions with Al Baraka's executive management and
research team, we recognize that the industry must address concerns
that the majority of Islamic banking assets are debt-based and that the
proportion of equity-based investments (such as Mudarabah and
Musharakah) does not form a significant portion of the Islamic
investments portfolio. The enabling support system to mitigate these
inherent risks and challenges is either limited or non-existent. As a
result, equity-based investments remain under-represented in the
Islamic banking industry,” opined Alawode.
Adnan
Ahmed Yousif, the group president and CEO of Al Baraka, pointed out
that the research project is the first of its kind. The methodology
will not only involve collecting data from a number of countries where
Mudarabah and Musharakah are being used in banking transactions, but it
will also examine what enabling legal and regulatory environment would
be needed to support the adequate risk-management of these
transactions.
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