Rationale of Customer Validation According to Islamic Teachings and Presenting the Optimal Model

Document Type : Practical

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Banking is one of the important elements of an economic system. Since banks are established and managed by investments and funds of a group of people, they are considered as an example of Muslims’ public treasury. It is rationally and religiously essential to protect people's assets in order to promote economic development and justice. In such circumstances, risk management will become a vital component of financial and credit activities. Among the types of risks faced by banks and financial institutions, credit risk is of special importance. Quantification and measurement of credit risk made customer validation essential for its proper management before granting facilities.Several verses in the Holy Quran are about the etiquette and rules of business and its related margins. Using the descriptive analysis method and also the evidence extracted from the Quran, traditions and jurisprudential origins, this paper tries to examine the rationale of customer validation for granting facilities and present a proper model for it. As a final point, it presents a model called "the Islamic Model" indicating the criteria derived from verses and traditions for customer validation. This model includes indicators (parameters) such as gain and profit, security, operational efficiency and competence, contract, credit behavior, awareness and knowledge, and view of the future

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