RISK MANAGEMENT INNOVATION IN ISLAMIC BANKING: INTEGRATION OF ISLAMIC VALUES AND BUSINESS EFFICIENCY

Abstract

This study explores the integration of Islamic values into risk management innovation in Islamic banking and its impact on business efficiency. Risk management in Islamic banking requires a distinct approach compared to conventional systems due to its adherence to sharia principles, such as the prohibition of riba , gharar , and maysir . By leveraging sharia-compliant contracts and advanced technology like blockchain and artificial intelligence, Islamic banks aim to enhance transparency and mitigate risks effectively. The study highlights the importance of maqashid sharia (the objectives of Islamic law) in shaping risk management strategies that ensure both financial stability and societal benefit. Additionally, the research emphasizes the role of product diversification and stakeholder engagement in reducing risks while maintaining business efficiency. Employing a qualitative descriptive approach, the study analyzes various patterns and methods of integrating sharia principles into innovative risk management practices. The findings underline the potential of Islamic banking to balance ethical adherence with operational excellence.