1. INTRODUCTION ABSTRACT

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1 Mahmud Dehghan Nayeri 1 ;Fatemeh Pourya 2 1 PhD Student of Operational Research, Department of Management, Tehran university, Corresponding author (mdnayeri@ut.ac.ir) 2 M.A student of Financial Management, Department of Management, Tehran university (n_pouria67@yahoo.com) ABSTRACT The Islamic banking system follows the same objectives sought by the conventional banking in the world but based on the jurisprudence and principles of Islamic transactions. The most important principle of the Islamic banking is to divide profit and loss from joint transactions and economic activities while avoiding lucre or the interest of money. Therefore, the Islamic banking has a structure based on real assets and capitals while the conventional banking is based on risk, credit, and interest rate. The conventional banking transfers risks to the customers using different tools. In contrast, the Islamic banking shares risks from economic activities between the bank and its customers and thus both parties have an equal share of profit and loss arising from investments. This leads to the formation of a wide range of risks in the Islamic banking. Accordingly, the present study employed an applied-descriptive research aiming to identify and rate the risks faced by the Islamic banking system. To this end, using cluster analysis and Fuzzy TOPSIS; different risks in the Islamic banking were reviewed and divided into two groups of risks specific to the Islamic banking and risks associated with the conventional banking. The results indicated that of the risks identified, credit, market, and liquidity risks were rated as the most important risks. Besides, risks specific to the Islamic banking were shown to be less important than the shared risks between the two banking systems. Keywords: the Islamic banking, risks, cluster analysis,fuzzy TOPSIS 1. INTRODUCTION Today, the issue of risks and how to manage them is taken into account in all business and financial domains. Commercial banks are seen as one of the most important factors behind the emergence of risks as these banks collect people s deposits and use these deposits as resources to perform banking operations. Therefore, given the constant changes in environmental factors and economic systems; everyday different risks affect the financial structures of banks. In addition, due to its own features, the Islamic banking system is facing different types of risks whose identification and management is very important (Mehrabi, 2010). One of the most important techniques used in the financial and banking sector that has received much attention recently is the risk management. Given its particular features, the financial and banking system is facing various risks such as credit risks, liquidity risks, market risks, and so on. Therefore, identifying and controlling the level of each of these risks is highly significant for the financial and banking system (Abolhassani&HassaniMoghaddam, 2008). The Islamic banking system is a part of the broad concept of the Islamic economy which integrates the Islamic value and moral system into the economic structure. The Islamic financial system is devised in a way that in which lending, borrowing, and investment operations are performed in an environment where the possible risks are shared between the financial system and its customers (MosharafJavadi&GhouchiFard, 2009). Due to its particular features and religious requirements, the Islamic banking system is facing the following risks concerning the assignment and equipment of resources: 1. Risks shared with the conventional banking system 2. Risks specific to the Islamic banking system. As was mentioned, in the Islamic banking system, the risks associated with economic activities are shared between the bank and the customers and thus both parties have an equal share of profit and loss resulting from investments made in the bank while in the conventional banking model, risks are transferred to the customers using different tools. Given the nature of the Islamic banking system as represented in the form of different types of participatory and transactional contracts, the risks found in the Islamic banking system are different from those faced by the conventional banking system as it is will be discussed as one of the objectives of the present study. Accordingly, using cluster analysis and Fuzzy TOPSIS; different risks in the Islamic banking are reviewed and divided into two groups of risks specific to the Islamic banking and risks associated with the conventional banking. Then, the identified risks are identified. The findings of this study can provide 19

2 mechanisms for the banks active in Iran in order to manage the risks with higher ratings in the Islamic and conventional banking systems. 2. LITERATURE REVIEW 2.1. Risk by Definition Risk literally means the possibility of the occurrence of danger or being faced with danger, harm, damage, and reduction in the income level. Instability and uncertainty is a part of the in the today s world and exists in the lives of all organisms and organizations. Change is considered as the most important cause of risks and since change is always present and its extent is ever on the rise, so is the risk. In other words, risk is not also always present but its extent is rising day by day. Risk is generally refers to the possibility that the realized returns are different from the expected returns. in some cases, however, risk is defined as the unfavorable change in the realized returns (Soroush&Sadeghi, 2007). In fact, each factor that prevents the realization of future predictions is seen as a risk factor. Furthermore, risk is regarded as a potential loss resulting either directly from income and capital losses or indirectly from the constraints that reduce the ability of banks to achieve their business and financial objectives. Such constraints impose risk on banks by reducing the bank ability in the management of business affairs or by making banks unable to achieve profits resulting from different situations. Risks in the banking system are completely different from risks in other sectors as a result of factors such as the number and the diversity of banking operations with different natures, the quality of banking capital and its limitations, protecting banking stockholders and depositors interests, the position of depositors resources and their abundance, lack of knowledge and expertise concerning the resources management, and the registration of numerous financial operations. All these factors make the risk management in banks more sensitive, complicated, and difficult than the risk management in other economic units. In addition, some risks are bank specific and do not apply to other economic entities. On the other hand, special features of some operations in Islamic banks have made the risk management faces more sensitivities and complexities. Nevertheless, the occurrence of risk in both conventional and Islamic banking systems will lead to the reduced profitability shown by the profitability less than what was expected, the destruction of all the profit predicted, and finally the loss. However, it should be noted that loss is the most destructive form of risk that can cause the loss of a part or all of the bank capital or even a part of deposits and in the extreme cases the whole banking deposits, endangering the bank entity (Mehrabi, 2010) The Nature of Islamic Banking System The Islamic banking system is a part of the broad concept of the Islamic economy which integrates the Islamic value and moral system into the economic structure. As such, moral and value concepts in the Islamic banking system are much beyond the simple concept of how banks and financial institutions are managed. Building upon these moral and value concepts, a new banking system is proposed in which the Islamic banking system uses a set of financing methods that are consistent with Islamic principles and teachings and avoids factors that are prohibited based on these principles. Besides, the Islamic banking system pays equal attention to possible profits and losses of stockholders and customers of banks and financial institutions in the transactions. Therefore, the following characteristics can be attributed to the Islamic banking system (MosharafJavadi&GhouchiFard, 2009): - Justice:An Islamic bank should not charge the clients with extra transaction fees. - Income distribution: Income distribution must be made based on the level of risk imposed on the clients. - Loss distribution: Loss distribution must be made based on customers ability to tolerate the incurred losses. In addition, the Islamic banking system is of a participatory nature and it takes into account all risks faced by a business unit or a businessman. Earnings and losses, regardless of their level, must be distributed equally between the banks and its clients (MosharafJavadi&GhouchiFard, 2009). 20

3 2.3. Risk Distribution in the Islamic and Conventional Banking Systems Characteristics of Islamic banks and financial intermediation models used by them have made the financing of economic activities be performed in two totally different ways. The main difference between the Islamic banking system and conventional banking is related to the employment of the Islamic contracts based on participation of both parties in resulting income and losses. Such a difference makes risks associated with banking operations are distributed between depositors and investors differently in the two banking systems. In other words, risk management in the Islamic banking system due to its non-lucrative nature and its special concepts requires exercising care in the Islamic banking concepts. The main principle in risk management and its causes in the Islamic finance is the distribution of income and loss from transactions and avoiding paying lucre or the interest of money. Besides, like shareholders in the srtock market, depositors in the Islamic banking share risks and earnings from investments made (Mehrabi, 2010). Conventional banks pay a fixed interest rate to the depositors which is gained from loans, real assets (lands and properties), or returns from various joint funds. Loans granted to customers (debtors) are secured partly by preloan requirements. The risks associated with the funds owed are imposed on debtors and they are responsible to repay the loan and its interest at the maturity date. The relationship between the lender and the borrower is very clear. The bank owns the funds and the debtor pays returns (the interest rate) to the bank. Banks calculate the interest rate based on the current interest cost in the market. In order to protect themselves against losses from loans paid, banks perform their operations under customary and contractual banking requirements. Besides, if a debtor makes a default in paying his account, the bank will impose more transaction fees and interest rates on the funds owed. When a firm makes a default, the bank may be the first institution that has the right of appropriating the firm assets (MosharafJavadi&GhouchiFard, 2009). Following the emergence of the Islamic economy, a special type of banking was proposed that attempts to pay equal attention to the interests of both parties (the bank and the investor). In this financial system, bailing out is proposed along with borrowing. This banking system differs greatly from the traditional banking in the world concerning the performance, nature, and objectives. In the Islamic banking, when the bank grants a loan to a firm; the bank will become the owner of the asset which is going to be bought by the firm using the received loan. However, if a default is made by the debtor, the asset will be auctioned. The asset will remain under the ownership of the bank until the debtor repays the loan. As a result, lucre or the interest of money is avoided by replacing fixed payments with profit and loss payments in the Islamic banking system (Kadkhodaei, 2001). While Islamic banks do not pay lucre, they pay the return rates to the investors deposits. They calculate returns for creditors accounts based on profits and returns from their real investments. An Islamic bank may undergo losses, which means that the actual fund deposited by depositors is exposed to risks under profit and loss sharing (PLS). In fact, the Islamic banks announce their expected PLS returns so that depositors can make decisions concerning investments in these banks (MosharafJavadi&GhouchiFard, 2009). As was mentioned earlier in this paper, the Islamic banking system is facing two different risks. The first group covers those risks shared with the conventional banking system and the second group includes the risks specific to the Islamic banking and financial system that originate from religious laws and requirements. These two groups of risks are discussed in the following sections Risks Shared by the Conventional and Islamic Banking Systems Operational Risks: As was noted in the previous sections, the operational risks are usually caused by technical and human errors or by an event. The Iranian free-interest banking system is facing relatively frequent operational risks due to its special features. The most important factors that increase this type of risk in the Iranian banking system are: 1. Lack of expertise and proper training among the staffs in the Iranian banking system concerning the implementation of Islamic contracts 2. Unavailability of comprehensive accounting software packages appropriate for Islamic financial contracts 3. Unavailability of a comprehensive monitoring and control system to oversee the conclusion of financial contracts, staffs, and generally the banking system based on Islamic lams (Abolhassani&HassaniMoghaddam, 2009). 21

4 Liquidity Risks: Liquidity risks refer to unpreparedness of banks to provide loans and facilities or the inability of banks for the timely repayment of debts/deposits. Liquidity risks are caused by the following factors: 1) Deposit withdrawals, 2) Transformability of noncash assets into cash assets, 3) Volume of investments, and 4) Temporal gap between assets and liabilities (Mehrabi, 2010). One of the causes of the increased liquidity risks is the bank inability to gain cash by spending acceptable costs through borrowing. Given the prohibition of lucre/interest in Islamic laws, the free-interest banking system is not allowed to borrow cash through interest. Therefore, it has to use other methods of gaining liquidity (Abolhassani&HassaniMoghaddam, 2009) Market Risks: Market risks include changes in the interest rate, exchange rate, stock prices, or product prices. Banks may face risks in different ways as a result of current and future changes in the value of special assets such as the market value of participatory assets. Market risks may exist in security portfolios (such as asset-based securities or bonds) or in different instruments (derivatives interest rate) that are used for transaction or investment purposes Credit Risks: Credit risks are associated with granting loans, sales, and purchase so that there is the impossibility of returning the loans and their interest and the possibility of losses from transactions concerning the product quality, items transacted, and the reliability of the transaction parties. Such risks arise when the borrower or the bank counterpart are not able to perform their obligations Risk Specific to the Islamic Banking System Legal Risks: Most Islamic banks perform their operations in an environment that is not much in harmony with Islamic principles. Legal environment is one of such environments. Some of the factors that cause this inconsistency are: 1) Lack of legal bases, 2) The incapacity of the current legal system, 3) Lack of basic laws for the Islamic banking, and 4) Unavailability of regulations related to Islamic methods of financing (MosharafJavadi&GhouchiFard, 2009) Participatory Investment Risks: Risks that are arising from the entrance of Islamic banks into different kinds of participations (in the form of a guarantor or financer of a part of the participation investment) so that the participation investment is exposed to the risk of commercial activities Interest Rate Risks: These risks arise from the impact of market factors on the asset return rate so that the actual returns are lessthan the returns expected by holders of investment accounts Rating of Islamic Banking Risks Various studies have been performed in Iran and abroad on the risk identification and management in the Islamic banking system and the rating of risks of Islamic instruments, some of which are reviewed here. Moussavian and Shirmardi (2011) performed as study to identify, classify, and rate risks associated with partnership securities with a focus on Imamiah jurisprudence using multiple-criteria decision-making modeling. They reviewed references related to partnership securities and their operational model and identified and classified the model risks based on the Delphi method. Finally, they rated the identified risks through combining TOPSIS technique and simple additive weighting (SAW). Similarly, Talebi and Rahimi (2012) identified and rated rental securities to reveal and document securities risks using the Delphi technique and rate them using TOPSIS. In addition,moussavian et al., (2013) conducted a study entitled Identification and rating of risks of Islamic financial instruments (Sokuk) using the Delphi technique. They identified the general and specific risk of the most important financial instruments and then rated the identified risk in the instruments based on their level using analytical hierarch process (AHP). Kadkhodaei (2000) conducted a study on Risk phenomenon in the Islamic banking system and explored different types of risks experienced by banks. He divided them into systmativ and non-systematic risks. The findings indicated that the financing system governing the Islamic banking is facing risks such as non-repayment, moral, and liquidity risks as well as fluctuation in economic variables and regulations. Sundararjan and Errico (2002) conducted a study under The position of investment instruments and Islamic financial institutes in the international financial system: Major 22

5 issues in risk management and current challenges and explored the complexities of financing using participatory methods and its risks in the Islamic banking system. Najmabadi (2002) in a study entitled Basic differences of risk distribution in Islamic and traditional banking systems, examined four types of financial, operational, market, and extra-organizational risks in the traditional and Islamic banking. They concluded that risk management is much more difficult in the Islamic banking due to its especial characteristics than in the conventional banking. AghiliKermani (2002) in a study entitled Risk management in the traditional banking in comparison to free-interest banking system explored four types of market, credit, operational, and liquidity risks in the Islamic banking system. He concluded that as assets are registered in the free-interest banking under investment, the only difference between the two banking systems is caused by credit risk. As a result, mechanisms different from those employed by the conventional banking must be introduced to manage credit risk in the free-interest banking. Abolhassani&HassaniMoghaddam (2008) conducted a study under Different types of risks and how manage them in the Iranian free-interest banking analyzed various risks faced by the Iranian banking system and proposed several functional approaches consistent with Islamic principles to manage different risks. MosharafJavadiandGhouchiFard (2009) in an article, Risk in Islamic banks and financial institutions with an approach to legal risk, studied the Islamic banking structure and legal risks and causes of such risks in the Islamic banking system. KazemiNezhad (2009) in a study entitled Risk distribution differences in the conventional and Islamic banking systems introduced risk and risk management in general terms and then explored risk distribution differences in the Western and Islamic banking systems. 3. RESEARCH METHODOLOGY The present study is an applied research concerning the objectives it follows and it uses a descriptive-survey research design. Previous studies through surveying experts in the field and using clustering techniques and fuzzy TOPSIS as complement methods have resulted in the identification different types of risks in the Islamic banking system. The findings of these studies suggest that given the religious requirements and its own characteristics in the allocation and equipment of resources, the Islamic banking system is facing the following risks: 1. Risks shared between the Islamic and conventional banking systems including operational risks, liquidity risks, market risk, and credit risk. 2. Risks specific to the Islamic banking system including legal risks, participatory investment risk, and interest rate risk. After identifying the above risks, a questionnaire including all the seven risks identified was developed and was administered to a group of experts in the banking system. Of the collected questionnaires, 40 were selected based on the banking professionals opinions. Then the questionnaires were analyzed using the clustering techniques. Accordingly, seven homogenous clusters were chosen as rating indicators based on the clustering efficiency indices. To this end, K-mean clustering analysis was used to provide appropriate opportunity to use the opinions of more experts in rating the importance of each risk. Using the clustering analysis, it is possible to classify the opinions of multiple experts into homogenous clusters that show the maximum differences with other clusters. Each cluster representing opinions expressed by a group of experts rather than a single expert can be used in multi-criteria decision making techniques. Then, using Chen s (2000) model andthe concept of membership function in the fuzzy logic, the opinions by expert clusters about risk were determined in the interval of triangular numbers. Finally, the identified risks were rated using fuzzy TOPSIS Fuzzy TOPSIS TOPSIS as one of multi-criteria decision-making techniques uses n target criteria to rate m options. This technique is based on choosing an option with the minimum distance from the ideal favorable response and with the maximum distance from the ideal unfavorable response. In addition, it seems that special techniques must be used analyze indefinite or interval data. Accordingly, the fuzzy logic can be used for various decisionmaking techniques and enjoy its benefits. It is obvious that the main rational behind the use of fuzzy decisionmaking techniques is affect the uncertainty associated with human thinking in making decisions. The present study used fuzzy TOPSIS based onchen s (2000) model. Besides, Table 1 was used to change language variables into fuzzy values (Yang and Huang, 2007): 23

6 Table 1: Language variables and their fuzzy values Language variables Fuzzy values Unimportant ( ) Weak ( ) Important ( ) Relatively important ( ) Very important ( ) In the fuzzy TOPSIS, first the decision matrix D (am n matrix where m shows the number of decision options and n stands for the number of rating indices) is formed using the fuzzy data as follows: In this study, the columns in Matrix D includes opinions of expert clusters with n = 7 columns. Besides, the option in the decision matrix include all risks faced by the Islamic banking where m = 7. If the data in the fuzzy TOPSIS table are shown as triangular fuzzy numbers, the following equations apply: w j= α j, β j, χ j و W = w i,, w j,, w r, x ij = (a ij, b ij, c ij ) The next stage is descaling the decision matrix that is performed as follows: r ij = a ij c, b ij i c, c ij i c, j B; c j = max i c ij if j B i r ij = a j, a j, a j, j C; a c ij b ij a j = min i a ij if j C ij Where, B and C are profit and cost indicators. Then, the weighted normalized matrix is calculated where a weight should be given to indicators in the fuzzy TOPSIS table. Since the indicators in this table are clustered banking experts, the weight of all cluster is the same and equals (1,1,1). a ij v ij = r ij w j = c, b ij i c, c ij i c α j, β j, χ j = a ij i c α j, b ij i c β j, c ij i c χ j i In Chen fuzzy TOPSIS, the ideal positive response is shown by A* while the ideal negativeresponse is shown by Aˉ: A = v 1, v 2,, v n, v j = 1,1,1 A = v 1, v 2,, v n, v j = 0,0,0 Based on the definitions of theideal positive response and the ideal negative response, the distances of option i form the positive ideal and the negative ideal are estimated using the following equations: d i = d i = n j =0 n j =1 d v ij, v j d v ij, v j, i = 1,2,, m,, i = 1,2,, m, Where, V ij shows elements of the weighted normalized matrix. Then, the relative proximity of each option to the ideals (CC i ) is calculated as follows: CC i = d i = 1,2,, m, i + d i The final stage of the fuzzy TOPSIS is to rate the option in the descending manner (CC i ). d i 24

7 4. Results As was mentioned,after identifying the risks faced by the Islamic banking system, a questionnaire including all the seven risks identified was developed and was administered to a group of experts in the banking system. Afterwards, 40 questionnaires were selected based on the banking professionals opinions. Then the questionnaires were analyzed using the clustering technique. Accordingly, seven homogenous clusters were chosen as rating indicators shown in Table 2. In this table, the opinions of each expert cluster about the identified risks were changed into the fuzzy values appropriate to the highest membership degree using the concept of membership degree: Nature of Risk Shared Specific to Islamic banking Types of Risk Cluster 1 Table 2: Fuzzy values from clustering stage Cluster 2 Cluster 3 Cluster 4 Cluster 5 Cluster 6 Cluster 7 seventh Operating (0.75,0.9,1) (0.35,0.5,0.65) (0.35,0.5,0.65) (0.35,0.5,0.65) (0.35,0.5,0.65) (0.75,0.9,1) (0.75,0.9,1) Liquidity (0.75,0.9,1) (0.35,0.5,0.65) (0.55,0.7,0.85) (0.35,0.5,0.65) (0.55,0.7,0.85) (0.75,0.9,1) (0.55,0.7,0.85) Market (0.75,0.9,1) (0.55,0.7,0.85) (0.55,0.7,0.85) (0.55,0.7,0.85) (0.35,0.5,0.65) (0.35,0.5,0.65) (0.75,0.9,1) Credit (0.75,0.9,1) (0.15,0.3,0.45) (0.75,0.9,1) (0.75,0.9,1) (0.55,0.7,0.85) (0.75,0.9,1) (0.75,0.9,1) Legal (0.75,0.9,1) (0.35,0.5,0.65) (0.35,0.5,0.65) (0.55,0.7,0.85) (0.75,0.9,1) (0.55,0.7,0.85) (0.35,0.5,0.65) Participatory Investment (0.75,0.9,1) (0.55,0.7,0.85) (0.35,0.5,0.65) (0.75,0.9,1) (0.35,0.5,0.65) (0,0.1,0.25) (0.75,0.9,1) Rate of returns (0.75,0.9,1) (0.55,0.7,0.85) (0.35,0.5,0.65) (0.55,0.7,0.85) (0.55,0.7,0.85) (0,0.1,0.25) (0.15,0.3,0.45) Then, the identified risks were rated using Chen s (2000) fuzzy TOPSIS as shown in Table 3: Table 3.Risks rated according to their importance Fuzzy Types of Risk TOPSIS Nature of Risk Rating Credit Risk 1 Shared Market Risk 2 Shared Liquidity Risk 3 Shared Legal risk 4 Specific to Islamic banks Operational Risk 5 Shared Participatory investment Specific to Islamic 6 risk banks Interest rate risk 7 Specific to Islamic banks As shown in Table 3, the results of combined approach of the clustering technique and fuzzy TOPSIS show that of the identified risks in the Islamic banking system, credit risk was rated as the most important risk followed by market risk. Besides, interest rate risk was rated as the least important risk. It was also noted that according to the participants, risks specific to the Islamic banking system were rated as less important than risks shared between the conventional and Islamic banking systems. 5. CONCLUSION The Islamic banking system follows the same objectives sought by the conventional banking in the world but based on the jurisprudence and principles of Islamic transactions.given the nature of the Islamic banking systemas represented in the form of different types of participatory and transactional contracts, the risks found in the Islamic banking systemare different from those faced by the conventional banking system. After 25

8 analyzing different types of risks found in the Islamic banking system and classifying them into risks specific to the Islamic banking and those shared by the conventional and Islamic banking systems, this study rated these risks using the combined approach of the clustering technique and fuzzy TOPSIS. The results showed that credit risk was rated as the most important risk followed by market risk. Besides, interest rate risk was rated as the least important risk.it was also noted that according to the participants, risks specific to the Islamic banking system were rated as less important than risks shared between the conventional and Islamic banking systems. This may shows the significance of taking into account the shared risks for the purpose of implementing the Islamic banking system and the more transparent background of the conventional banking than the Islamic banking among the banking experts in Iran. Therefore, paying more attention to principles and application of the Islamic banking, awareness rising, and the analysis of risks specific to this banking system seems of high significance for banking experts. Besides, the findings of this study can help the Iranian banking sector to manage more serious risks in the Islamic and conventional banking with great efficiency. REFERENCES 1.Abolhasani, A. &HassaniMoghaddam, R. (2008). Various types of risks and how to manage them in the interest-free banking system of Iran.Quarterly of Islamic Economy, (30): Sundararjan, V. &Errico, L. (2002). The position of investment instruments and Islamic financial institutes in the international financial system: Major issues in risk management and current challenges.proceedings of the Thirteenth Conference on Islamic Banking. Tehran: Iranian Higher Banking Institute. 3. Sorush, A. &Sadeghi, M. (2007). Securities risk management. Quarterly of Islamic Economy, Talebi, M.; Rahimi, A.M. (2012). Identification, classification, and rating of rental securities.iranian Economic Explorations, (18): Alam Tabriz, A.; RajabipourMeibodi, A.; &Zareian, M. (2008).Function of fuzzy TOPSIS in improving the performance evaluation of banking branches using DAE. Industrial Management, 1(3): AghiliKermani, P. (2002). Risk management in traditional banking compared to interest-free banking.proceedings of the Thirteenth Conference on Islamic Banking.Tehran: Iranian Higher Banking Institute. 7. Kazeminejad, F. (2009). Risk distribution differences between Islamic banking and conventional banking.banking and Economy, (101): Kadkhodaei, H. (2000). The phenomenon of risk in Islamic banking.proceedings of the Thirteenth Conference on Islamic Banking.Tehran: Iranian Higher Banking Institute. 9. MahdaviNajmabadi, S.H. (2002).Basic differences in the distribution of risk in Islamic and traditional banking systems.proceedings of the Thirteenth Conference on Islamic Banking.Tehran: Iranian Higher Banking Institute. 10. Mehrabi, L. (2010). Risk management in interest-free banking system. Economics New Findings, (130): Moussavian, S.A.; ShirmardiAhmedabad, H. (2011). Identification, classification, and rating of risks associated with partnership securities with a focus on Imamiah jurisprudence using multiple-criteria decision-making modeling. Knowledge of Islamic Economy, 5 (1): Moussavian, A.; Vosough, B.; &FarhadianArani, A. (2013).Identification and classification of risjs of Islamic financial instruments.strategic Management Thinking, 13 (1): Asian Institute of Finance. (2013). Risk Management in Islamic Banks. 14. Bashir, M.,(1999). Risk and Profitability Measures in Islamic Banks: the Case Study of Two Sudanese Banks, Islamic Economic Studies, 6(2): Chen, C. (2000). Extensions of the TOPSIS for group decision-making under fuzzy environment. Fuzzy Sets and System, 114, Chen, T. (n.d.). Determining attribute importance based on triangular and trapezoidal fuzzy numbers in ( z ) fuzzy measures, Figueira J, Greco S, Ehrgott M (2004) Multiple criteria decision analysis: state of the art surveys. Springer, New York. 18. How, C.Y., Janice, K.A. and Melina, V.P. (2005), Islamic Financing and Bank Risks: the Case of Malaysia, Thunderbird International Business Review, and 47(1): Kahf, M Distribution of Profits in Islamic Banks, Studies in Islamic Economics, 4(1). 20. Khan,T and Ahmed,H. 2001, Risk Management: An Analysis of issues in Islamic Financial Industry. Jeddah: Islamic Research and Training Institute (IRTI). 21. Obaidullah, M. (2002). Islamic Risk Management: Towards Greater Ethics and Efficiency. International Journal of Islamic Financial Services, 4(3). 22. Yaakob, A.,Sofian,A.,andSalleh,B. Introduction To Risk Management In Islamic Financial Institutions.fstep. 11-Yang, T., and Hung, C.C. (2007), Multiple-criteria decision making methods for plant layout design problem, Robotics and Computer-Integrated Manufacturing, Vol.23, No.1, pp

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