Credit Risks in Islamic Banking - Part 1

There is no doubt that the concept of risk was well known to ancient societies. Even in financial decisions, there is no doubt that people knew very well that lending to someone who is bankrupt has a high probability of losing your money as compared to a good standing debtor. Nevertheless, risk became an important tool of decision making when it becomes possible to measure risk and to assign values to different situations I select the best possible one. Therefore, I didn’t claim in this article that our forefathers didn’t know the concept of risk. Nor that they didn’t recognise credit riskiness, albeit, they didn’t have an effective measurement for risk. What I claim is that the concept of risk frequently mentioned by jurists in their studies of the theory of contract, has nothing to...