Finance Management and its role in Reducing Credit Risks in Islamic Banks: A descriptive Applied study on Al-Jumhouria Bank - Tripoli Branch

Abstract

Financial Management and Its Role of Tackling Credit Risk in Islamic Bank (Descriptive Study at Joumhouria Bank Tripoli Branch in Libya

This research aims to find out the credit management at Joumhouria Bank Tripoli Branch in Libya, to find out the role of financial management of tackling the credit risk at Joumhouria Bank Tripoli Branch in Libya, and also to find out the obstacles and solutions of the credit management process at Joumhouria Bank Tripoli Branch in Libya.

Over the past few years, Islamic banks have achieved great success and tremendous growth. They have proven themselves by having a presence in the banking and financial sector. More than 500 Islamic financial institutions worldwide, with an estimated asset volume of US$ $1 trillion, and the growing acceptance of Islamic finance, has led many countries to grant licenses to financial institutions to operate on the principles of Islamic law. The licensed institutions are spread across 75 countries, both Islamic countries (Bahrain, Kuwait, Malaysia, UAE) and non-Islamic countries (Singapore and UK).

The researcher concludes, regarding financial management in Islamic banks, financial management carries out various financial activities through the implementation of special technical functions such as financial analysis, project evaluation, preparation and interpretation of financial statements, budget drafts, mergers, financial reorganizations and others. It carries out also through the implementation of administrative functions such as planning, regulation, guidance, supervision that is in financial form, and by efficiently completing work enabling them to achieve their specific goals. Thereby they contributes to the achievement of the objectives of bank overall. The researcher believes that the risk is an integral part of banking, especially with high competition, technological developments, increasing volume of banking transactions and the need for large banks. Banks are now facing various banking risks that vary in severity from bank to bank, although with evaluation , good analysis and study. Therefore, managing risk from all factors can help bank success and ensure continued success in the banking market with satisfactory returns and low risk.

From the result of this research, the researcher found that financing and fund governance are important aspect for the bank in all activities that impact financing or what is called capital on the commercial terms of the bank. They have a close relationship to obtain benefits, because that is the goal sought by economic institutions. The risk is one of the phenomena of banking activity, but credit risk is the most important risk that threatens the existence and continuity of banks. It is due to credit as the main pillar in banking. Islamic banking is regulated by various legal rules and controls. Credit risk management has taken on a different character. It has depended on the implementation of standard model and effective computation with prudent principles. The future of the Islamic finance industry will largely depend on how to manage some of the credit risks arising from the provision of such services.