A type of risk that an Islamic financial institution (IFI) faces in consequence of another type of risk known as rate of return risk. If investment account holders (IAHs) are assumed to behave similar to conventional depositors, then these IAHs may prefer to withdraw their funds in case profit rates drop below expected levels. This constitutes the very essence of withdrawal risk. Another form of risk may consequently arise: liquidity risk. Funds available with the bank would dry up, exposing the bank to lower levels of liquidity. Liquidity risk may reflect a bank’s inability to meet, or difficulty in meeting, obligations associated with financial liabilities that need to be settled/ transferred by delivering cash or a type of financial asset

Another consequence of rate of return risk is the so-called displaced commercial risk (or DCR), which is the risk arising from competitive pressures on a bank to attract and retain IAHs as fund providers. The bank come under market pressure to pay a return higher than the rate earned on assets financed by IAHs when the return on those assets is below those provided by competitors.