Managing non-performing loans in Islamic Banks

Abstract

One of the most important challenges of the Islamic bank is the problem of default loans; it has a direct effect on banks financial situation (profitability, liquidity, the balance between liquidity and profitability.(
The solution is very clear in the traditional banks by increasing interests. The Islamic banks apply the Islamic Lows, it is important to find alternative tools to solve this problem such as the confirmed guaranties, the increase in the profit margin and judiciary.
Those solutions affect the client’s confidence, it means there is an obligation to deal with in order to avoid negative effects and find new way to minimize this phenomenon .