STRATEGY AND IMPLEMENTATION OF RISK MANAGEMENT IN ISLAMIC BANKING IN A SHARIA APPROACH TO FINANCIAL STABILITY

Abstract

This study discusses the strategy and implementation of risk management in Islamic banking with a sharia approach to achieve financial stability. Risk management in Islamic banking has special characteristics that are different from conventional banking, especially in terms of compliance with sharia principles that avoid haram elements such as usury, gharar, and maysir. This study identifies various types of risks faced by Islamic banks, including credit, liquidity, market, operational, and legal risks, as well as mitigation strategies applied to reduce their impacts. The main focus of this study is the analysis of how the application of sharia principles can be the basis for formulating effective and sustainable risk management policies. This study also examines the relationship between the application of sharia-based risk management and financial stability, both at the individual bank level and the banking system as a whole. The results of the study indicate that the integration of sharia-based risk management not only improves the performance of Islamic banks but also contributes to the stability of the wider financial system, by maintaining a balance between economic benefits and social sustainability.