Legal Risks Faced By Investors in Dealing with Islamic Financial Transactions and Mitigation Actions/Strategies to Keep Off Legal Risks: The Case of Murabaha Transaction
Thesis or dissertation
University of Exeter
Background: This research project is based on the subject of legal risks that has faced by investors in dealing with Murabaha Islamic transaction. This research project portrays background history of Sharia law and about Murabaha Islamic transaction. In the context of this Islamic transaction, legal risks and actions/strategies to deal with risks of Murabaha has represented under this research study. Aim and Objectives: The main aim of the research is thus to explore the legal risks associated with Murabaha transactions, and to identify ways of mitigating such risks. The research objectives are directed to represent about Murabaha transaction, risks involved in Murabaha transaction and solutions/actions to mitigate risks. Methodology: The data collection process has initiated with collection of secondary sources, along with the examination of contracts formed between banks and clients. This will be helpful in acquiring relevant information about the legal risks involved in Murabaha Islamic financial transaction. Results and Analysis: It has been analysed that legal risks in Murabaha Islamic financial transaction has negatively impacted interests of the parties involved in it. In contrast to the other investment options, it is considered as a highly risky due to high probability of bad debt risk. It has been analysed that banks can prevent harm from risks involved in this transaction through effective financial strategy. Conclusion: It can be concluded that Murabaha transaction is highly risky investment option in Islamic banking that have involved different legal risks, such as credit risk, liquidity risk, mark-up risk, operational risk, unauthorised agreement risk, transparency risk, commodity risks and others. It can be concluded that lack of new amendments in the Sharia system is the big issue that emerges risks in Murabaha financial transaction. It is crucial for Islamic banks and other parties involved in Murabaha to do proper scrutiny and processing prior undertaken this Islamic financial transaction.
Van Engeland, Anicée
PhD in Law