Risk management practices and attitude of Pakistani Islamic banking system employees

Abstract

Financial institutes are considered to be one of the important role playing sectors in the financial establishment and economic growth of any country. Banks are part of this sector. In country like Pakistan, we have two types of banking system: one is conventional banking system and the other is Islamic banking system. This study concentrates on the Islamic banking system. Risk is one of the important factors for the success of any institute. This study focuses on risk management practices (RMP) of Islamic banking system in Pakistan. Data population of the study is Islamic banking system of Pakistan. For the data collection we used questionnaires. For this study there are five independent variables: understanding risk and risk management (URM), risk assessment and analysis (RAA), risk identification (RI), risk monitoring (RM), credit risk analysis (CRA) and one dependent variable, RMP. Initially, data reliability was found by applying Cronbach’s alpha, after that we adopted Pearson’s correlation test to detect the multi co linearity problem. No such potential problem was detected; so we applied regression model to analysis the impact of independent variables on dependent variables. From the analysis we concluded that there were four variables which have positive significance impact on the dependent variable RMP. Key words: Risk management practices, Islamic banking, risk monitoring.

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