A systematic literature review on the effects of risk management practices on the performance of Islamic banking institutions
Risk management practices (RMPs) are important for Islamic banking institutions (IBIs) mainly because they represent the risk exposures that may affect their financial stability. The fact that RMPs is not a new activity in IBIs but still attract significant numbers of studies indicate the relevanc...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Penerbit Universiti Kebangsaan Malaysia
2021
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| Online Access: | http://journalarticle.ukm.my/17930/ http://journalarticle.ukm.my/17930/1/51967-170558-2-PB.pdf |
| Summary: | Risk management practices (RMPs) are important for Islamic banking institutions (IBIs) mainly because they represent
the risk exposures that may affect their financial stability. The fact that RMPs is not a new activity in IBIs but still
attract significant numbers of studies indicate the relevancy of the subject matter. For instance, weak risk management
will hamper IBIs’ performance and eventually the stakeholders and industry at large. There are still lack of evidence
on the effects of RMPs specifically on the IBIs given the nature and unique characteristics of the risks faced by these
institutions. This systematic review article focuses on the effects of the RMPs on the performance of IBIs. Systematic
literature review (SLR) is used in this study as it produces quality evidence on RMPs with more significant results on the
effects of the IBIs’ performance. It defers greatly from the conventional literature review because the development of the
systematic review is based on the main research question and utilized advanced search provided in the online journal
databases. This study used eight (8) electronic journal databases and applied Preferred Reporting Items for Systematic
review and Meta-Analysis (PRISMA). Based on the 39 primary studies related to RMPs and performance of IBIs, a
total of 16 themes and 17 sub-themes were identified. The study finds that IBIs with good risk mitigation practices, risk
management environment, policies and procedures, and risk monitoring have better financial performance. Hence, IBIs
must ensure that RMPs a priority within the institutions to increase the financial performance and improve the overall
competitiveness in the Islamic banking industry. |
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