Islamic lending transactions are governed by the precepts of the shariah, which bans interest and stipulates that income must be derived as return from entrepreneurial investment. Since Islamic finance is predicated on asset backing and specific credit participation in identified business risk,...

This paper provides a conceptual overview of key aspects of the design and implementation of solvency stress testing of Islamic banks. Based on existing regulatory standards and prudential practice, the paper explains how Islamic finance principles and their impact on various risk drivers affect...

Derivatives are few and far between in countries where the compatibility of financial transactions with Islamic law requires the development of shari''ah-compliant structures. Islamic finance is governed by the shari''ah, which bans speculation and gambling, and stipulates that income must be...