ISLAMIC FINANCIAL MANAGEMENT: Answer thee questions. Each question consists of 35 marks.


You have just been appointed as the Chief Risk Officer (CRO) of Bersatu Islamic Bank which was established in July 2014. For the last six months, the risk management department has not been operating fully. Bank Negara Malaysia (BNM) being the regular is somewhat concerned about this matter and BNM is giving the Bank six months to fully develop its risk management department. As the CRO, your task is to ensure that the department is an operational mode within the stipulated time.

a) In setting up the risk management process, what steps do you need to do?

b) What kind of resources do you require to ensure that the process can be up and running within the next six months?

c) What Shariah input need to be incorporated into the system?

d) Why do you think the risk management process is a vital component in a banking set-up?



You have been appointed as a consultant to assist a large conglomerate in setting up a takaful operation. Your client has in its group a large retail bank (coventional with an Islamic window) and a large conventional general insurance company. The Group’s Board of Directors has little awareness of takaful.

The country has a 70% Muslim population and the per capita income is US$12,000. Islamic finance is just developing, hence there are very few existing takaful operators in the country. Nonetheless, the regulator is encouraging more Islamic financial institutions to be established. Takaful operators are regulated under the same provisions as insurance companies, i.e. there are no separate regulations for takaful, and for the most part the laws are still secular. For start-ups the operators must have a minimum paid up capital of $100 million and current regulation only allows a single line of business, either family takaful or general takaful business.

a)Draw out a comprehensive plan as to how the takaful operation to be set up.

b) Which takaful business model should the company adopt? Give reasons for your choice.

c) If bancassurance is to be used to distribute the products, discuss the various risks and challenges of distributing takaful products via this channel.



Berkat Islamic Bank is a locally established Islamic Bank that have been operating over the last 15 years. As a Chief Executive Officer (CEO) of the bank you are faced with the dilemma that the bank in terms of its daily activities is more involved (more than 80%) with trade financing transactions (Murabahah transactions). Your Board of Directors wants the bank increase its risk-sharing financing schemes.

a) Prepare a paper to the Board explaining the features of a risk-sharing finance scheme.

b) Explain how risk sharing is embedded in Islamic instruments.

c) How do you intend to market risk-sharing finance products to the public?


Note: I could email you some reference materials 


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