Islamic Perspectives on Liquidity Risk Management Practices of Islamic Banks in Malaysia and Bahrain

AbdulFattah AbdulGaniyy




The objective of this paper is to highlight the Shariah guidelines on management of liquidity risk based on Qur’an and Hadith. It also seeks to discuss the sources and challenges of liquidity risk in Islamic banks. Various attempts being made at mitigating the effect of liquidity risk on Islamic banks in Malaysia and Bahrain are also reviewed. The paper adopts library research by extracting information from relevant texts, journals and other publications. The authors recommend extension of Liquidity Management Framework in Malaysia and Liquidity Management Centre in Bahrain to other countries to ease the problem of liquidity management. It also advocates for independent or autonomous central authorities that will provide Shariah-compliant Lender of Last Resort (SLOLR) across each of the countries operating dual banking systems to provide adequate support for Islamic banks

Keywords: Liquidity, Liquidity Risk, Liquidity Risk Management, Liquidity Management Framework, Liquidity Management Centre, Islamic Banks, SLOLR.

JEL Classification: G01, G21, G24, G28, G32


Liquidity, Liquidity Risk, Liquidity Risk Management, Liquidity Management Framework, Liquidity Management Centre, Islamic Banks, SLOLR.

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