Banking risk management

The creation of the Islamic banking sector in the Republic of Djibouti in 2006 changed the economic dynamics of the country. Djibouti's economy is driven by the service sector. The financial sector also plays a central role in the economy. The banking sector, comprising conventional and Islamic banks, dominates the financial sector. There are 12 banks, nine of which are conventional and three are Islamic. Islamic banking began in 2006 and is growing at a relatively rapid pace. To date, the size of the assets of Islamic banks has reached 50 billion Djibouti francs. Assets of Islamic banks increased by 20%. Assets, deposits and loans of Islamic banks increased by 20%, 15% and 14% respectively. Despite the significant successes of Islamic banks. Islamic finance in Djibouti has several challenges. First of all, Islamic finance is not geographically, sectorally and commercially diversified. The second limitation of Islamic finance is the lack of regulation. Islamic banks in Djibouti are not fulfilling their full potential. Because two thirds of the financing of Islamic banks only musharakah and murabaha provide Islamic financial services. For Islamic banks to realize their full potential, they need to expand and diversify Islamic financial services such as Istisna, Ijara and Salam. It shows that Islamic finance in Djibouti is not yet mature. Keywords: Banking sector, Islamic finance, Risk management, Djibouti.