Rafay lower risk. According to the research,

Rafay and Sadiq (2015) studied that financial institutions and
Islamic banks are faced by many difficulties and challenges mainly due to
non-existence of a comprehensive framework. Those problems are existence of
different schools of thought and idea within Islam, lack of general awareness
among various stakeholders and ineffective legal rules and regulations. Islamic
finance want to provide a financial system that is asset backed and free charge
of interest. By solving these existing problems in the fragmented framework, the
development of framework will guide the future research. It will help to smooth
the transformation and make it manageable from conventional banking system to
Islamic banking system.

 

Zahan and Kenett (2012) studied that conventional and
Islamic banking market places had applied the both instruments of risk
management and hedging. In this research, they have compared the instruments of
financing, framework and models in these two banking environments and search
out the speculative behavior of Islamic Banking. From the hedging perspective,
Islamic banks speculate in some cases with hedging instrument of conventional
banking. This is one of the strategy for facing challenges and continue to grow.
Islamic banks should think about the rules and regulations that Sharia and conventional
banking used is different. Islamic banking have a responsibility for social
development and support economic growth by using production and trade. So that,
they might use some derivative instruments that can minimize risk and also can
generate income at the same time.

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Jawadi and Louhichi (2014) studied that the performance of
Islamic finance regarding that of conventional finance over the last decade. During
the current financial crisis, conventional finance is more ineffective and
risky, at the meanwhile someone has expected that Islamic finance innovations can
enable investors getting higher profit and lower risk. According to the research,
they realize that conventional financial products gains higher returns than Islamic
finance over the first sub period from 2000 to 2006. But, they also notice that
the Islamic finance outperforms classical finance during financial crisis and
turbulent time from 2006- 2011. Those results converge to indicate a well and high
performance level for Islamic financial indexes for the three regions under
consideration. Besides that, It also indicates that the Islamic funds
outperform conventional financial products during the turbulent time.