The Role of Qualitative Financial Engineering in Managing Risks of Financing Contracts in Islamic Banks

This study tackles the most important applications of qualitative financial engineering used in risk management of Islamic financing contracts. It is based on a descriptive analytical approach. The results proved that qualitative financial engineering tools would help in risk management in different ways; some of these risks can be transferred to other parties such as conducting cooperative insurance contracts as well as Parallel Contracts, particularly, parallel Salam and parallel Istisna'a. Risk management also can be achieved through reducing some of these risks through various guarantees such as mortgages and guarantors. It can be reduced also by keeping the property of the asset to the bank until the last payment of customer's commitment through lease-to-own or lease purchase contract. Also risk management can be applied by avoiding risk by specific applications of contracts as Al Jua'la; when it is used by banks for marketing and selling goods and services of certain companies in exchange of commission, and also through the securitization of certain assets.