Credit Risk Assessment and Management Practices in Islamic Banks of Pakistan: A Qualitative Approach

Abstract

Purpose: The term “credit risk” has been widely explored individually, but the conceptual framework has not been formed up till now. The purpose of this conceptual paper is to find out the ways in which credit risk face by Islamic banks of Pakistan. Then to find out the ways through which Islamic banks of Pakistan can minimize the credit risk by using different approaches. This conceptual modal/paper can be useful to  the  managers of Islamic banks of Pakistan for the management of credit risk.Research Methodology: following research is of descriptive type and a conceptual framework has been developed to measure and manage the credit risk faced by Islamic banks on the basis of Crux of different studies conducted by researchers throughout the world.Findings: The conceptual framework is beneficial for the credit risk management in Islamic banks of Pakistan. Research found that Islamic banks in Pakistan facing different types of credit risk and suggestion are given that how can Islamic banks in Pakistan manage credit risk by using different approaches.Research Implications: The practical application of this research is to increase the credit risk management ability of the Islamic banks in Pakistan.

Keywords:Credit Risk,Credit risk Management Islamic Banks of Pakistan, issues in Islamic banks of Pakistan, ,loan loss Provision, portfolio mix.