comparison between conventional and islamic banking

2 rows Conventional Bank treats money as a commodity and lend it against interest as its compensation. The theoretical differences between Islamic and conventional banks do not have clear implications for total earnings the capability to access market capital or efficiency.

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Money is a product besides medium of exchange and store of value.

. The Islamic banking institutions are more risk taker because they directly involve in the management of the projects by creation partnership with the borrower and earns more than the conventional ones. No Shariah based restriction on investment of funds. This is the best way a Client can build relationship with the Bank.

Bank Account is a contract between the Bank and the client allowing the customer to use Bank Service against a cost of fees. Qard Current accounts are offered under this contract where the risk of the funds lies with the bank. Islamic banking on the other hand uses Islamic teachings and Syariah laws in their banking products which levy profit rates instead of interest rates.

It is a sale and purchase contract between the two parties with disclosing of profit. Both systems accept deposits from consumers and commercial entities and offer various financing solutions to them. Profit on exchange of goods services is the basis for earning profit.

Islamic banks perform all tasks and undergo all operations similar to that in a conventional bank setting the difference being that their functions adhere to the regulations set by Allah. Conventional banking uses interest charged to lenders along with other investments to turn over an income. One must refrain from making a direct comparison between Islamic banking and conventional banking.

The estimated size of Islamic banking is 166 trillion to. Many have come in contact with all types of banking products conventional and Islamic on a daily basis but may not be. 14 Scope of the Study.

Islamic Banks offers deposit products based on the following structures. An Australian researcher Metwally 1997 conducted a research to know about the differences in. Difference Between Islamic and Conventional Basic Banking Account.

While Islamic banks are. An introduction to general Islamic banking principles and structures. Islamic banks primarily work upon different modes of finance such as Murabaha Salam and Diminishing Musharakah etc Murabaha.

Money is a medium of exchange and one can use it to acquire assets and any other commodity allowed by Sharia Laws. However specific considerations have been taken to separate the two and ensure that Islamic banking meets Shariah principles. General Banking system of ABBL of its Islamic Banking Branch.

Conventional bank invests the deposits in non-shariah compliant avenues and subsequently earns non-shariah compliant returns. Higher complexity in combination with the relatively young age of the Islamic financial institutions is likely to result in higher costs and thus a lower level of cost. However the conventional banking focus on lending emphasis on ability to repay and apply only a financial criteria.

Funds are invested in Shariah compliant-avenues. This on its own is a major defining factor for the difference in the philosophy of the operations of these two banking systems. Meanwhile Islamic banks recognize 4 patterns namely partnership seller-buyer leasing and creditor debtors in terms of equity holders.

Major Differences Between Islamic and Conventional Banking. Differences between the Islamic Banking and Conventional Banking. This is the first in a series of articles on Islamic finance and banking concepts.

The key contrast is that conventional banks earn their money by charging premuim and expenses for administrarions while Islamic banks acquire their cash by profit and loss sharing exchanging renting charging expenses for administrations rendered and utilizing other sharia contracts of trade. The study would focus on the following areas of AB Bank Limited. It is true but there is more to it.

The main difference is that Islamic Banking is based on Shariah foundation. Concept of money. Deposit of different kinds and schemes are accepted on the Mudaraba principle of islamic shariah.

Real Asset is a product Money is just a medium of exchange. The ratio analysis technique is used in a study of compariso n between Islamic and conventional banking in Pakistan by Awan 2009. This is because Islamic banking and conventional banking are extremely different in many ways.

Conventional banks are operating is interest in. At first glance it may seem as though there is little to differentiate between Islamic and conventional banking. Conventional banks will position themselves as debtors to customers who act as creditors.

Time value is the basis for charging interest on capital. Account is the systematic record of transaction. The Islamic Banking focus on investment emphasis on soundness of the project and apply moral criteria in investment.

Cannot charge customer for not maintaining minimum balance since account is on Qard basis. Difference between Islamic and conventional banking. Viii To get a clear idea about the Comparisons between Conventional and Islamic Banking.

A brief comparison of Islamic banking with Conventional Banking. Orientation Conventional banks are not oriented towards any religious teachings because they focus on worldly profits. This has become all the more important since an increasing number of local and foreign banks in the UAE are either starting their own separate.

Market have been saturated as compared to the Islamic banking market. When you ask many people the main difference between an Islamic bank and a conventional bank the most probable answer is that the former does not charge interest. In this case the bank as seller discloses the cost and profit to the customer the buyer.

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