Use of data mining for the assessment of the Mudaraba performance risk in the light of macroeconomic factors

Abstract EN

In this article, we present an approach to evaluate a Mudaraba project financed by the Islamic bank, taking into account macroeconomic indicators for the estimation of performance and risk.

For conventional banks, interest rate credit is the main source of income.

On the other hand, for Islamic banks, the interest rate is prohibited by Islamic religion, and so they derive directly their profitability from the return of investment projects based on the Mudaraba.

The goal is to develop a model based on the algorithms of the data mining to evaluate a Mudaraba investment project.

This mathematics model, which is being developed based on previous data from similar projects, is composed of several key elements, including the performance of the project and the macroeconomic factors.

To assess the performance risk of the Mudaraba project, all these elements are being inserted using data mining techniques and algorithms, which initially allow the use of non-supervised classification methods to group these projects according to common factors (which allow them to be successful or not); then in a second phase using predictive techniques to build a predictive model for the risk of return.

The model allows evaluating the project financed by the Islamic bank and represents an important means that will help the managers to make decisions on its realization or rejection.

It is a tool to classify projects that should be financed according to priorities governed by the volume of gains and losses represented by the performance indicator.