Liquidity Risk Management of Firms in Accordance with Sharia Through Private Deposit Funds
Subject Areas : Financial Knowledge of Securities Analysis
Ali Rahneshin
1
(دانشجوی دکتری مدیریت مالی دانشگاه امام صادق)
Keywords: liquidity risk, Credit on Account, Islamic banking, Private Deposit Funds,
Abstract :
Working capital finance and liquidity management in a low-cost, quick and easy way is concern of firms. Hence, financial institutions (including Islamic financial institutions) seeking instruments of providing services in this area. But the firm's liquidity and short-term financing and risk management instruments are difficulties to coordination and compliance with Shariah principles. That is why a credit on account service is rarely found in Islamic banks. This paper first reviews the credit on account services provided by Islamic banks. Then we review different methods proposed for the implementation of credit on account services with Shariah. In the end of paper based on firm's working capital process, we recommend a new solution through a new financial institution that is the "private deposit funds". In the new approach, instead of hedging working capital fluctuations through various short-term financing instruments, attempt to reduce liquidity risk by reducing the volatility of cash flows.