Measuring Risk-Sharing Finance: Evidence From Uzbekistan And Islamic Banking Practices

Abstract

This study examines the extent of risk-sharing finance in Islamic banking by analyzing the composition of bank assets and constructing a Risk-Sharing Finance Friendliness Index (RSFFI) for Uzbekistan. The findings reveal that risk-sharing instruments constitute a very small share of total Islamic banking assets across countries, with risk-shifting, debtlike instruments dominating in practice. Even in leading countries, the adoption of profitand-loss sharing mechanisms remains limited. The RSFFI results indicate that Uzbekistan has a below-average level of readiness, primarily constrained by underdeveloped financial markets despite relatively stronger institutional and legal conditions. These results highlight the importance of financial sector development and institutional strengthening to promote risk-sharing finance.