Bahrain-based Al Baraka Banking Group has collaborated with the World Bank to begin a research partnership that would be beneficial to the global Islamic banking industry.
The partnership’s first initiative, part of a planned series of research projects, will be a study examining the risk-management challenges facing Islamic banks, with a particular focus on Musharaka and Mudaraba under the profit-and-loss-sharing system.
The research project is now under way. Its preliminary findings are expected to be available in the first quarter of 2015.
Al Baraka Banking group president & CEO Adnan Ahmed Yousif said: "This collaboration with the World Bank is yet another demonstration of the Group’s commitment to research and knowledge-building in the Islamic financial services industry."
"We are committed to serving the sector by addressing several pressing issues that the industry is facing today. The research collaboration with the World Bank is yet another step in this direction," Yousif added.
Abayomi Alawode, head of Islamic finance at World Bank, said: "The most pressing challenge facing the industry today is to prepare the ground for the profit-and-loss system to flourish. 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 Musharaka and Mudaraba) 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 nonexistent. As a result, equity-based investments remain under-represented in the Islamic banking industry," Alawode added.