It arising from both source (Assets & liability side) and is critical for Islamic Banks.
Cannot borrow funds to meet liquidity requirement.
Shariah’ does not allow the sale of debt other than its face value.
Selling debt based asset is not an option to Islamic financial institutes.
Assets of Islamic Bank’s are not liquid as compared to the assets of Commercial Banks.
Slow development of financial instruments Islamic Bank’s are also not able to raise funds quickly from the markets
To evaluate the liquidity risk management (L R M) through a comparative analysis between conventional and Islamic banks of Pakistan. Liquidity risk is the risk that a bank may be unable to meet its short term obligations. This research would be addition into existing body of knowledge.
Analysis between Islamic banks and conventional banks.
Measured by different financial ratios.
Islamic banks are less profitable than conventional banks.
Islamic banks are stated only few years back so their economies of scale is quite low.
Conventional banks have an experience to handle risks and profits .
Risks cannot be detached with profits however Islamic banks can improve their liquidity management techniques by improving their practices to mitigate risk.
Ho: Banks with Islamic Financing have on average High liquidity risk than bank without having Islamic financing facilities. H1: Banks with Islamic Financing have on average lower liquidity risk than bank without having Islamic financing facilities.