Information Technology Risks in Islamic Banks
The Islamic finance (IF) industry is rigorously struggling to maintain the progress that was visibly started in the last couple of decades despite the growth that it has witnessed. The industry is yet to reach a level of sustainability, despite various initiatives in standardisations (accounting, compliance regulation, processes, legal documentation, and information systems), evolving knowledge of the industry (it is still lacking real innovation), enhancing Shari’ah awareness (taking into consideration the differences in interpretation), reaching out to the various markets (which are still very humble), and creating awareness (that is slow and in many cases not effective).
For the IF industry, information technology and systems (ITSs) pose a prominent challenge due to the industry’s lack of maturity, which could have direct implications and risks for the IF industry. One of the main reasons for the modest growth and expansion of the IF industry is the ineffectiveness of the currently available ITSs in addressing the real challenges of the IF operating model. This really had a direct impact in providing the appropriate technological platform for Islamic financial institutions (IFIs) to conduct their business, address their operational needs, and mitigate various risks effectively.
This challenge can be seen more clearly within the Islamic banks (or major groups of such banks) that operate as “universal” ...