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The Impact of Islamic Financial Instruments on Risk and Return | ||
| Baghdad College of Economic sciences University | ||
| Article 1, Volume 0, Issue 21, 2018, Pages 327-366 | ||
| Author | ||
| Dr. Ahmed Arif Karim | ||
| Abstract | ||
| This study aims at finding out the impact of Islamic financial instruments on risk and return with reference to the Jordanian Islamic Banks. The existence of such banks has proven to be for the benefit of the entire economy. This study presents an empirical analysis of How do the Islamic banks in Jordan perceive their own risks and returns and various developments? What is the possible impact of Islamic instruments on risk and return?. It was found that there is strong empirical support of a positive relationship between the Independent Variable that is Islamic Financial Instrument in Jordan Islamic Banks represented by the following instruments: (Murabaha, Bay'Salam, Musharaka, Mudaraba, Istisna'a, Ijara), and the dependent variable ( Risk and Return) Moreover, it contains empirical evidence that Islamic instruments used by the Jordanian Islamic Banks are free from Riba. It help in tackling the economic problems such as recession, inflation and distribution of wealth, unemployment and it participate in the growth of the production projects. But mismanagement of projects, incompetency, delay in paying back the dues on time from the side of clients causes these banks risk and effects their returns. Therefore, monitoring, evaluating and follow up processes are necessary to avoid risks. Islamic banks in Jordan must take into account developments in the market, particularly, the availability of technological innovation and information, reflect developments in the area of measurement and control of risk and promote a culture of risk management by providing suitable incentives, enhance market discipline by encouraging sound disclosure policies, promote cross-sector interaction, and strengthen market discipline by utilizing external assessments of banks for determining asset quality The Islamic financial system broadly refers to financial market transactions, operations and services that comply with Islamic rules, principles and codes of practices. In Islamic banking, the requirement to manage risks becomes more important due to the special nature of the financial intermediation process that is guided by the Shariah. Islamic financial institutions have a multi-facet role | ||
| Keywords | ||
| Islamic banks; Islamic Financial Instruments; Shari; Risk and Return | ||
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