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Islamic banks are shariah compliant as interest is forbidden in Islam, therfore Islamic Banks opt to user other mediums such as profit/loss sharing, fee's etc
Islamic banking is practices are based on Islamic (Sharia) laws. Interest in completely prohibited in Islamic banking It is asset based financing, in which trade of elements prohibited by Islam are not allowed. For example, you cannot take a loan for a Wine Shop and the Conventional Banking is based on Man-Made Laws. It is profit-oriented and its purpose is to make money through interest.
Conventional Banking Islamic Banking
Money is a commodity besides medium of exchange and store of value. Therefore, it can be sold at a price higher than its face value and it can also be rented out.
Money is not a commodity though it is used as a medium of exchange and store of value. Therefore, it cannot be sold at a price higher than its face value or rented out.
Time value is the basis for charging interest on capital.
Profit on trade of goods or charging on providing service is the basis for earning profit.
Interest is charged even in case the organization suffers losses by using bank’s funds. Therefore, it is not based on profit and loss sharing.
Islamic bank operates on the basis of profit and loss sharing. In case, the businessman has suffered losses, the bank will share these losses based on the mode of finance used (Mudarabah, Musharakah).
While disbursing cash finance, running finance or working capital finance, no agreement for exchange of goods & services is made.
The execution of agreements for the exchange of goods & services is a must, while disbursing funds under Murabaha, Salam & Istisna contracts.
Conventional banks use money as a commodity which leads to inflation.
Islamic banking tends to create link with the real sectors of the economic system by using trade related activities. Since, the money is linked with the real assets therefore it contributes directly in the economic development.
In Islamic Banking System Banking Business is run under Islamic Laws and Conventional Banking System Follows Banking Ordinance. The Major Difference Between the two are as follows:
>In Islamic Banking System Interest is strictly prohibited while most of the conventional Banking System run by allowing interest.
>In Islamic Banking System Investments are only made in real physical business on the contrary Conventional Banking System may invest in speculative business also.
Islamic Banking is interest free in contrast to conventional Banking.In Islamic Banking System Banking Business is run under Islamic Laws and Conventional Banking System Follows Banking Ordinance.Islamic banking tends to create link with the real sectors of the economic system by using trade related activities. Since, the money is linked with the real assets therefore it contributes directly in the economic development.
Islamic banking is diffrent from conventional banking due to Islamic banking are base on sharia law which states that banking transactions are base on profit sharing due to RIBA or interest is strictly prohibited in Islam.
islamic banking is financing activity that compiles with a islamic law and its practical application through the development of islamic economics on other hand conventional bank does not treated with islamic law.
yes the islamic banking system should be implemented.
Islamic Banking is based on the Islamic or Shariah laws where interest for any product is not taken by the Bank. It striclty follows the Islamic guidelines on the products offered and practices followed.
Conventional Banking system is the standard banking system used worldwide by non-Islamic Banks who make profit through interest.
islamic banking is an ethical banking system and it is purely practice on islamic law (shariah) interest is prohibited in islamic baking system.and all those activity is prohibited which is against islamic law.eg you cannot take loan to open a casino or wine shopWhile on The other hand conventional banking is an unethcal banking system and its purely work on Man Made law .it is profit orinted and its main purpose is to make profit through interest
Islamic banks dont give intrest
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