The Liquidity shortage in Islamic Banks

Abstract

IX Abstract Nowadays, all companies around the world have difficulties in many ways after the global financial crisis in 2008-2009. Numerous known institutions have suffered from liquidity problems and some of them had collapsed for the same reason. Thus, the liquidity shortage constitutes a major financial and banking problems in all over the world. Consequently, this research focuses on the reasons for the liquidity problems and clarifies its impacts on the Islamic banks and its performances. Then, this research tries to come up with some suitable solutions to the liquidity shortage problems. Regarding the study method, this research known as a phenomenology and pure qualitative study that seeks in a recent phenomenon, the method way I used in this research is the semi-structure interviews – which is common in qualitative measurement – with many scholars in the Islamic financial system and with the experts in the same context in order to go deeper into the problems and see their roots. These interviews designed to meet the research objectives and to answer all the research questions. This study concludes that Islamic banks in Saudi Arabia have to improve their performances and instruments in many ways in order to serve the clients and the economy in a better way. In addition, it also shows that the Sukuk market in the kingdom of Saudi Arabia is very weak and need for more improvement. It would help the Islamic financial institutions to cover any problem in the liquidity fields faster than before through the trading in the Sukuk market. Another finding may be clear in the experience that done in Sudan which may help all Islamic banks to corporate together and come up with a strategy that is applicable to the sharia rule and in the same way it can help the liquidity enhancement among these banks. Finally, this study provides a number of recommendations for the proper and effective management of the liquidity in the banking industry as well as uncovering the areas of further research which will enhance the banking sector.