How can an Islamic bank go bankrupt?
Jan Meriss Alfonso Assistant at Ascent Law LLC Islamic banks are facing financial problems because of high competition among them and the fact that they have limited customers. This research aims to study the bankruptcy risks of these banks. It uses a quantitative approach and a Discriminant analysis method. It also makes use of secondary data from 12 Islamic Banks. Interest-free loans Interest-free loans are necessary to meet basic needs. Siddiqi recognized this need and believed it is the duty of the state and community to meet needs. He, therefore, downplayed the role of Islamic banks in providing consumption loans and suggested they could offer limited overdraft facilities at no interest. However, the popularity of interest-free loans in Islamic countries has been accompanied by the emergence of new market players. The OPEC surplus, which was a boon to both sides, also facilitated the proliferation of these institutions. The multipurpose nature of Islamic banking poses practi...