{
  "title": "Cooperative and Islamic Banks: What can they Learn from Each Other?",
  "publication": "IMF Working Papers, August 26, 2013",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/cooperative-and-islamic-banks-what-can-they-learn-from-each-other-40888",
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  "summary": "Islamic and cooperative banks such as credit unions are broadly similar in that they both share some risk with savers. However, risk sharing goes along with ownership control in cooperatives, whilst Islamic banks share risk with borrowers and downside risk with depositors.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Islamic and cooperative banks (such as credit unions) both share some risk with savers.\n- The paper contrasts the institutional arrangements and risk-sharing mechanisms of cooperative banks and Islamic banks.\n- Key finding: Greater adoption of risk-sharing mechanisms embedded in Islamic financial products could strengthen cooperatives’ financial resilience."
    },
    {
      "heading": "Comparative analysis of risk sharing and ownership",
      "content": "- Cooperative banks:\n  - Risk sharing goes along with ownership control.\n  - Stakeholders (members/owners) typically have governance rights linked to risk exposure.\n- Islamic banks:\n  - Share risk with borrowers and share downside risk with depositors.\n  - Islamic banking is consistent with mutual ownership, which may ease governance and efficiency concerns implied by Shari’ah constraints."
    },
    {
      "heading": "Implications for governance and efficiency",
      "content": "- Islamic banking compatibility with mutual ownership:\n  - May address governance and efficiency concerns that arise from Shari’ah constraints.\n- For cooperative banks:\n  - Introducing greater risk sharing among stakeholders—by adapting mechanisms from Islamic financial products—could strengthen financial resilience."
    },
    {
      "heading": "Key findings and recommendations",
      "content": "- Findings:\n  - Islamic and cooperative banks have broadly similar risk-sharing orientations toward savers.\n  - The pairing of risk sharing with ownership control differentiates cooperatives from Islamic banks.\n  - Islamic banks allocate risk differently: with borrowers and depositing parties bearing downside risk.\n- Policy/operational recommendations:\n  - Consider embedding Islamic-style profit-and-loss sharing mechanisms into cooperative bank products to enhance resilience.\n  - Explore mutual ownership structures in Islamic banking to mitigate governance and efficiency concerns linked to Shari’ah compliance.\n\nSource: Cooperative and Islamic Banks: What can they Learn from Each Other? By Saeed Al-Muharrami and Daniel C Hardy, August 26, 2013.\n\n---\n\n Content in this bundle\n\n- wp13184\n  - wp13184 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp13184 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/cooperative-and-islamic-banks-what-can-they-learn-from-each-other-40888"
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    "Authors: Saeed Al-Muharrami, Daniel C Hardy",
    "Published: August 26, 2013",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484380833.001",
    "Islamic and cooperative banks (such as credit unions) both share some risk with savers.",
    "The paper contrasts the institutional arrangements and risk-sharing mechanisms of cooperative banks and Islamic banks.",
    "Key finding: Greater adoption of risk-sharing mechanisms embedded in Islamic financial products could strengthen cooperatives’ financial resilience.",
    "Cooperative banks:",
    "Islamic banks:",
    "Islamic banking compatibility with mutual ownership:",
    "For cooperative banks:",
    "Findings:",
    "Policy/operational recommendations:",
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