A systematic literature review of risks in Islamic banking system: research agenda and future research directions

This study employs a systematic review approach to examine the existing body of literature on risk management in Islamic banking. The focus of this work is to analyze published manuscripts to provide a comprehensive overview of the current state of research in this field. After conducting an extensive examination of eighty articles classified as Q1 and Q2, we have identified six prominent risk themes. These themes include stability and resilience, risk-taking behavior, credit risk, Shariah non-compliance risk, liquidity risk, and other pertinent concerns that span various disciplines. The assessment yielded four key themes pertaining to the risk management of the Islamic banking system, namely prudential regulation, environment and sustainability, cybersecurity, and risk-taking behavior. Two risk frameworks were provided based on the identified themes. The microframework encompasses internal and external risk elements that influence the bank's basic activities and risk feedback system. The macro-framework encompasses several elements that influence the risk management environment for Islamic banks (IB), including exogenous institutional factors, domestic endogenous factors, and global endogenous factors. Thematic discoveries are incorporated to identify potential avenues for future research and policy consequences.