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Uncertainty and risk management from Islamic perspective

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  • Bouslama, Ghassen
  • Lahrichi, Younes

Abstract

Most decisions are taken in very uncertain contexts and all objective economic behaviour is dictated by the efforts of different agents to protect themselves against uncertainty. So, how to act in the face of uncertainty to minimise the harmful consequences of recurrent financial crises? The purpose of this article is to answer this question by highlighting the ethical aspect of investments and finance from the Islamic perspective, which notoriously, forbids excessive uncertainty, gharar. Islamic law proposes a legal framework that specifies the rules by which risk is understood, managed, taken or shared. The way the Islamic financial system resisted the recent crisis leads us to study its unusual interpretation of risk. We also investigate whether Islamic ethics as an alternative could help to prevent the disaster of repeated financial crises.

Suggested Citation

  • Bouslama, Ghassen & Lahrichi, Younes, 2017. "Uncertainty and risk management from Islamic perspective," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 718-726.
    • Handle: RePEc:eee:riibaf:v:39:y:2017:i:pb:p:718-726
    DOI: 10.1016/j.ribaf.2015.11.018
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    References listed on IDEAS

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    1. Munawar Iqbal & David T. Llewellyn (ed.), 2002. "Islamic Banking and Finance," Books, Edward Elgar Publishing, number 2499.
    2. Al-Suwailem, Sami Ibrahim, 2006. "Hedging in Islamic Finance (Occasional Papers)," Occasional Papers 217, The Islamic Research and Teaching Institute (IRTI).
    3. Sami Ibrahim Al-Suwailem, 2002. "Decision-making under uncertainty: an Islamic perspective," Chapters, in: Munawar Iqbal & David T. Llewellyn (ed.), Islamic Banking and Finance, chapter 2, Edward Elgar Publishing.
    4. Khediri, Karim Ben & Charfeddine, Lanouar & Youssef, Slah Ben, 2015. "Islamic versus conventional banks in the GCC countries: A comparative study using classification techniques," Research in International Business and Finance, Elsevier, vol. 33(C), pages 75-98.
    5. repec:dau:papers:123456789/4438 is not listed on IDEAS
    6. Keffala, Mohamed Rochdi, 2015. "How using derivatives affects bank stability in emerging countries? Evidence from the recent financial crisis," Research in International Business and Finance, Elsevier, vol. 35(C), pages 75-87.
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    Cited by:

    1. Salma Rhanoui & Khalid Belkhoutout, 2019. "Risks Faced by Islamic Banks: A Study on the Compliance Between Theory and Practice," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(2), pages 137-146, April.
    2. Alshammari, Ahmad Alrazni & Syed Jaafar Alhabshi, Syed Musa bin & Saiti, Buerhan, 2019. "The impact of competition on cost efficiency of insurance and takaful sectors: Evidence from GCC markets based on the Stochastic Frontier Analysis," Research in International Business and Finance, Elsevier, vol. 47(C), pages 410-427.
    3. Wajdi Hamma & Ahmed Ghorbel & Anis Jarboui, 2021. "Hedging Islamic and conventional stock markets with other financial assets: comparison between competing DCC models on hedging effectiveness," Journal of Asset Management, Palgrave Macmillan, vol. 22(3), pages 179-199, May.

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