2015

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Browsing 2015 by Author "HAMMAD FAZAL"

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    RISKS IN SALAM IN ISLAMIC BANKING
    (UMT.Lahore, 2015-08) HAMMAD FAZAL
    Purpose: The purpose of this study is to describe the risks present in different stages of Salam when it was used as mode of finance in Islamic banking. Also, to discuss the mitigation tools to avoid those risks, highlighting the boundaries and limits for risk management mentioned by Shariah. Research Methodology: The research methodology used in this research is descriptive in nature. The study is theoretical research based. The topic that was selected is based on studying field of Islamic banking and finance and Islamic jurisprudence. Findings: Salam transaction is allowed in Sharia, under strict conditions. These conditions had made Salam, too risky, as compared to other Islamic modes of finance. Moreover, Salam contracts consist on different steps and phases. Number of risks is associated with each stage. All such risks were mentioned in the findings. Therefore, also some risks which was associated with gharar. Presence of such risks makes Salam transactions unlawful. Research Limitation: This research is limited to Islamic banks in Pakistan, focusing on Salam as mode of finance. In this study, Salam was discussed mainly as per Hanafi school of thought but other school of thoughts was also mentioned in a general way. Practical Implication: This research study will be helpful for risk analyst, so that he can recognize those risks which he can face in different stages and phases of Salam transaction. Also it will be helpful for Sharia Auditors of Islamic banks and other Islamic financial institutes, so that they manage and mitigate Sharia noncompliance risks in a better way. This study is also useful for finance manager of Islamic banks so that he can mitigate and manage those risks. Originality: Salam transaction is very useful modes of finance for Islamic financial institutes. No research work has been done on identification and management of risks involved in different stages of Salam. So writing of research paper that focuses on risk identification in different phases of Salam, their management and mitigation, was really needed.