Factors Affecting Risk of Musharākah Financing: Evidence from Pakistani Data

Abstract

Present study has focused the internal as well as external factors affecting risk of musharākah financing in the Islamic banks of Pakistan. Earlier studies have investigated both internal and external determinants of overall financing, but the current study is an attempt to investigate the factors affecting the risk of musharākah financing. To the best of the author's knowledge, no previous study has investigated the said association in the given sample. We found that both internal as well as external factors have a significant impact on the risk of musharākah financing. Among the external factors regulation is the only insignificant factor. Overall the determinants considered in the current study have a significant impact on the risk of musharākah financing.