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Documentation for Risk Mitigation in Islamic Trade Financing

Documentation for Risk Mitigation in Islamic Trade Financing

Shaikh Hamzah Razak, Imran-Firdauz Abu Bakar, Zainal Abidin Mohd Tahir
Copyright: © 2020 |Pages: 17
ISBN13: 9781799802181|ISBN10: 1799802183|ISBN13 Softcover: 9781799802198|EISBN13: 9781799802204
DOI: 10.4018/978-1-7998-0218-1.ch026
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MLA

Razak, Shaikh Hamzah, et al. "Documentation for Risk Mitigation in Islamic Trade Financing." Handbook of Research on Theory and Practice of Global Islamic Finance, edited by Abdul Rafay, IGI Global, 2020, pp. 471-487. https://doi.org/10.4018/978-1-7998-0218-1.ch026

APA

Razak, S. H., Abu Bakar, I., & Mohd Tahir, Z. A. (2020). Documentation for Risk Mitigation in Islamic Trade Financing. In A. Rafay (Ed.), Handbook of Research on Theory and Practice of Global Islamic Finance (pp. 471-487). IGI Global. https://doi.org/10.4018/978-1-7998-0218-1.ch026

Chicago

Razak, Shaikh Hamzah, Imran-Firdauz Abu Bakar, and Zainal Abidin Mohd Tahir. "Documentation for Risk Mitigation in Islamic Trade Financing." In Handbook of Research on Theory and Practice of Global Islamic Finance, edited by Abdul Rafay, 471-487. Hershey, PA: IGI Global, 2020. https://doi.org/10.4018/978-1-7998-0218-1.ch026

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Abstract

Risk mitigation is one of the key elements in trade financing. The use of documents represents one of the main techniques by banks in managing risks in trade financing. These documents play an important role in financing, insuring, and guaranteeing the banking operations. Islamic finance, on the other hand, utilizes various asset-based contracts. Islamic financial institutions in Malaysia tend to reconcile, using a combination of these contracts, to replicate the conventional banking techniques. These can be at odds with the conventional trade financing concept that “banks deal with documents and not with goods”. Hence, the undertakings may raise concerns regarding Shari'ah suitability. This chapter examines the challenges faced in the usage of documents covering all risk including Shari'ah risk management in Islamic trade financing.

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