Islamic Bank Case Study

1613 Words7 Pages
Islamic Bank or sharia bank, here in after referred to as a bank, a bank that operates not by relying on the interest. Islamic Bank or commonly called the bank without interest, is a financial institution or banking operations and products developed based on the Qur’an and the Hadith of the Prophet Muhammad. In other words, Islamic bank are financial institutions that provide basic business financing and other services in interchange and the payment of money circulation, adjusted to Islamic law. In 1991, Bank Muamalat as first Islamic Bank in Indonesia was operated owing to hard work of the scholars and the Intellectuals in Indonesia, formed in a in a team known as MUI Banking Team. Furthermore, the government issued Act No. 10 of 1998 as…show more content…
It represents one of the crucial risks in banking industry. Liquidity risk has the possibility of loss, generating the cash needed to meet short term maturity dates included. The banking industry requires liquidity be given important consideration in funds management. There are various strategies for bank to obtain liquidity, as follows: a) holding enough cash assets, b) converting assets to cash and c) borrowing. Management of liquidity ratio is one of the most important challenges for Islamic banks because of the prohibition of usury-based instruments. In this condition, Islamic banks do not have comprehensive possibilities to do, especially in terms of the transformation period and risk as two major functions of financial intermediary (Oehler, 2006) 2.2.2 Source of…show more content…
The higher the LAR ratio indicates the loan of bank us up and its liquidity is low. So, the higher the ratio, the bank is more risky may be to higher defaults. Loan to Asset Ratio= (Total Loans)/(Total Assets) X 100% Capital Adequact Ratio (CAR) Capital Adequacy Ratio (CAR) or also known as KPMM (Kewajiban Penyediaan Modal Minumum) is a measure of a bank’s capital to absorb losses by calculating the ratio of capital to risk. CAR is a ratio that shows how much of the total assets of bank that contain risks (credit, investment, securities bills of other banks) financed part of its own capital in addition to obtaining funds from outside the bank. This ratio is used to protect depositors and promote the stability and efficiency of financial system. Accordance with standards established by the Bank of International Settlements (BIS), all banks in Indonesia are required to provide a minimum capital of 8% of ATMR (Aset Tertimbang Menurut Resiko). The higher the Capital Adequacy Ratio (CAR) of the bank, then the chances of banks getting financial difficulties is smaller. Thus, bank has strong financial capability and is able to control the risk of loss

More about Islamic Bank Case Study

Open Document