Course Objectives

It is widely accepted that Shari’ah banking model is one of the fastest growing areas of international Banking & finance. Estimated, that there will be more significant growth development over the next five to ten years. On the other hand Risk management is also another area that every banking industry has to attend to, Islamic banks are not different.

The course is designed for participants seeking an in–depth understanding of the Shari’ah Risk Management. The course sets out the Concept of Risk management in Islamic Banking and then moves on to the practical aspects of applying it with demonstrations from case studies and interactive exercises throughout the program.

Specifically, this important training course aims at:

• Understanding how Islamic banks work and the kind of risk they are exposed to

• Discussing the criteria of risk management from Shari’ah point of view

• Looking into the Shari’ah-intrinsic techniques of risk management

• Studying the Basel II proposals of risk mitigation and how should they apply to Islamic banking

• Understanding the methodologies of calculating capital adequacy in Islamic banks as proposed by ISFB

• Discussing processes of monetary authorities’ supervision on Islamic banks.

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This is a comprehensive programme designed to give delegates an all round understanding of the issues involved in Risk management for Islamic banking.

The course specifically targets:

• Investment Bankers

• Corporate and Commercial Bankers

• Corporate Financiers

• Private Bankers

• Analysts

• Asset managers

• Risk Management Managers

• Consultants

• Lawyers

• Investment Advisors

• Regulators

• Auditors and compliance professionals

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Day 1

Day 2

• Risks addressed by Basel II and IFSB

  • Credit Risk,

  • Operational Risks, and

  • Trading Book Risk

• Risk Mitigation: kinds and effect on calculation of capital adequacy

• The three Pillars of Basel II Accord

  • Capital Adequacy

  • Supervisory Review Process

  • Market Discipline

Day 3

• Monetary authority supervision. Does it make a difference between Islamic banks and conventional banks?

• Market disclosure in Islamic banks: a serious administrative-cum-political problem!

• Managing risks in Islamic banks

  • Establishing risk management environment, policies and procedures

  • Maintaining processes of risk measurement, mitigation, and internal monitoring and control

  • Shari’ah-Intrinsic risk mitigation techniques

    • Revenue sharing contract

    • Revenue sharing and Revenue Sharing Sukuk

    • Service and usufruct-based finance

    • Third party guarantee: deposit guarantee

    • Reverse Murabahah and Murabahah line of credit

    • Bundles/packages financing: applying the majority rule

    • Hedging through options

    • Principal insurance and collaterals

  • Management processes and techniques of specific risks

    • Credit risk management

    • Interest rate risk management

    • Liquidity risk management

    • Operational risk management

    • Risk adjusted rate of return on capital (RAROC)

    • Securitization

    • Derivatives

Day 4

• Sensitivity of Islamic banking operations to Basel II proposals

  • Financial intermediation in Islamic banks and the myth of two-tier Mudarabah

  • Traditional conservatism of Islamic banks (worry about the idea)

  • Islamic Financing Modes and Practices Sensitive to Basel II Proposals:

    • Debt-creating Islamic modes of financing

    • Non-debt crating Islamic financial modes

  • The effect of restricted deposits, unrestricted deposits and deposits in current accounts on credit and other risks’ exposure in Islamic banks

• Capital adequacy

  • Importance of capital adequacy in the banking industry

  • Basel II proposals for the calculation of capital adequacy in conventional banks

  • Capital adequacy in Islamic banks: The issue of last resort

• Importance and Calculation of credit Risk

Day 5

• IFSB Standard on credit risk in Islamic banks

• Methodologies of credit risk calculation

• IFSB Standard on operational risk and its calculation

• IFSB Standard on market risk and its calculation

• Calculation of Minimum Capital Requirement in Islamic banks, Theory and reality!

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Having written over 27 books and booklets in English and Arabic, and over 80 papers, Dr. Monzer Kahf has focused on Islamic finance and economics for over 33 years.

In addition, Dr. Kahf has been both working and training people in the field. His served as Professor of Islamic economics and banking at the graduate program in Islamic Economics at the Yarmouk University, Jordan, 2004-2005 and as a senior research economist at the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank from 1985 – 1999. Currently, Dr. Kahf has his own consultancy and training business that provides consultation, training, auditing and instruction in the field of Islamic finance, banking and economics.

Dr. Kahf has organized and conducted many training courses at IDB, IRTI, commercial Islamic banks, and other banking institutions in several countries in the Middle East, South and Southeast Asia, West Africa, Europe and North America. He has also trained people in Islamic Economics, Zakah and Awqaf. He has been an invited lecturer/speaker on Islamic banking, finance and economics by several national and international training and teaching institutions and conferences in several countries. He has also been a collaborating expert at the Islamic Fiqh Academy of the Organization of Islamic Conference (OIC) and member of several of its technical and methodological committees on Shari’ah and economics.

Dr. Kahf was awarded the IDB Prize for Islamic Economics, 2001 and the President of Syria Award for best University Graduating Student, July 1962. Dr. Kahf is fluent in English, Arabic and knows French.

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