Islamic/shariah banking is an alternative banking system open to both muslims and non-muslims the banking association has a number of members who offer both conventional and islamic banking products and others who offer only one type of banking products. And banking: islamic banking & conventional banking submitted by: rehman sohail hamza arshad submitted to: ms shehla akhtar [pic] management sciences department national university of modern languages h-9, islamabad islamic banking vs conventional banking one must refrain. There is similarity between conventional banking and islamic banking which helps to promote economic growth provided financing services such as credit facilities for business activity, mortgage, securities, etc in order to achieve their same ultimate profit objectives. Practice of conventional and islamic banking sector an insight of related studies is as follows:- islamic banks are striving to capture the maximum the prohibition of interest in islam caused many writings to come forward with an idea to establish banks that do not work on interest basis.
Although islamic banking has many products similar to those offered by conventional banking, the two entities differ conceptually 1 conceptual difference between islamic and conventional current account. The basic difference between islamic banking and conventional banking is the structure of how the bank is set up islamic banking, in its dna is intended more than just being profitable it is meant to be providing service to support the activities of the ummah (muamalat) defined within. Islamic banking is a banking system based on islamic shari'ah principles which are different from the principles followed by conventional banks i would like to write about the products offered by islamic banks, but before that, i will write about the differences between islamic banks and conventional.
Let us first understand the major difference between islamic banking and conventional banking system islamic banking is an ethical banking system, and its practices are based on islamic (shariah) laws islamic banking and conventional banking - major differences. Third, conventional banks do not get involved in the buying and selling or even the keeping of commodities, only within certain conditions also these banks, in accordance with their charters, can not buy capital assets or fixed assets unless they are used by the bank itself13 as for islamic banks. In the modern islamic banking system, it has become one of the service-oriented functions of the islamic banks to be a zakat collection centre and they also pay out their zakat lending money and having it back with compounding interest is the essential function of the conventional bank.
This book includes the details explanations of islamic and conventional banking in additions various products of islamic banking such as ijara, murabahah, musharaka and mudaraba have been define and elaborated in details moreover, book consists of researchers findings and conclusions. Islamic and conventional banks are all banks but having different system of managements, aspects, history, products and even acceptance according to islamic and conventional banking practice abstract: a major negative feature of capitalism is it helps rich and neglects poor. Islamic and conventional banking summary of the previous lecture we studied the concept of time value of money in the conventional economic system and its basis on interest at a fixed rate under islamic economic system it is based on price for a commodity with a difference for cash and credit sale.
Difference between islamic bank & conventional bank on liability side the previous discussions all relate to that side of the balance sheet which is generally referred to as the asset side now we shall briefly analyze the liability side of the balance sheet in which the islamic banks accept funds from. Islamic banking is an alternative system of conventional banking in many countries all over the world the reason of this research is to assess the liquidity between islamic and conventional banks of pakistan and to find out the major issues regarding their comparability. Conventional banks are more business oriented, while the islamic banking systems main motive is to help people although some nations have provided restrictions on the interest rates that the conventional banks charge, the exact percentage is not specified in these restrictions (capie, 1993. Islamic banks are based upon sharia (islamic law) and cannot act beyond the boundaries set by sharia whereas conventional banks are based upon secular banking laws and financial practices of the respective countries (international finance, 2013) conventional banks work on the.
Islamic economics islamic banking is based on the principles of islamic economics — an economic framework in accordance with islamic law another country that has a visible existence of islamic banking at comprehensive level is malaysia where both conventional and islamic banking. 1 conventional and islamic banking submitted by 1 syed mohsin hassan naqvi 2 junaid shahid 3 s m zafar abbas 4 smahsan 2 • we selected two banks first is habib bank limited taken as the conventional banks representative and • second one is al-baraka as representative of islamic banks. On the other hand, conventional banking is essentially based on the debtor-creditor relationship between the depositors and the bank on one hand, and islamic law considers a loan to be given or taken, free of charge, to meet any contingency thus in islamic banking, the creditor should not take.
Islamic banking is guided by islamic law which is known as shariah principles in particular, islamic law prohibits the collection and payment of interest to know islamic banking at first we have to realize the difference between profit and interest where conventional bank gives certain percentage. Evidences suggest islamic banking is very much practiced like modern conventional banking with certain restrictions imposed by shari'a and addresses the large number of business requirements successfully hence perceiving islamic banking as totally foreign to business world is not correct. As with conventional banking islamic finance requires tools or instruments through which to run below is a brief account of each of the most normally used manners of islamic funding. Islamic banking vs conventional banking in most islamic countries, they tend to practice two types of financing in banking industry which are conventional and islamic banking the country like in malaysia has successfully developed an islamic banking system that operates in parallel with the.
Conventional banking involves giving and receiving interest payments which as per islamic laws is not acceptable hence it is haram or not halal there are two major difference between islamic banking and conventional banking: 1 conventional banking practices are concerned with. Islamic banks and other financial institutions must comply with a variety of principles besides avoiding interest that difference is just one of many ways that the fundamentals of islamic banking differ from those of conventional commercial banking. Many confuse facts around conventional and islamic banking many have come in contact with all types of banking products, conventional and islamic, on a daily basis but may not be aware of how they operate and more importantly, advantages or disadvantages posed towards their finances.