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What is the difference between conventional loan and Islamic loan ? Why customer should take Islamic loan?

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Question added by بسام عبدالله قريش , مراقب مالي للمجموعة , شركة هادي حمد ال همام القابضة
Date Posted: 2014/02/06
Nour Eddin AlMadani
by Nour Eddin AlMadani , Operation Financial Officer , AlHilal Capital Managment Advisory

 

its totally two different concepts

 

1) islam doesnt allow usury but it allows trading...what it means roughly

 

a) an entity makes profit by trading...buy at low sell at higher price...produce at low cost sell at higher price.

b)the seller must takes risks in order to make profit.

 

in case of islamic property loan, the bank buys from vendor/developer then sell to the buyer by instalment. so how bank takes the risks? it happens when the property is under development...let's say the project is abandoned, the bank has to pocket all the losses as it couldnt deliver the completed house to the buyer

 

 

2) conventional loan....it is usury coz u make money on top of money....which is prohibited in islam.

 

in case of abandon project, the buyer still has to pay the loan coz the bank loan u money to buy the property...the bank takes no risks or minimal risks

 

 

IN REALITY

1) it happened when buyer sued bank islam for still asking the buyer to pay the loan even the housing project is abandoned. the buyer won the case

 

2) bank getting smarter, usually in islamic loan u must have akad...previously the akad was based on the property, now the bank gets creative n put the akad to lombong arang in indon etc....so they take no risks.

 

3) the islamic banks indirectly dont follow the true concept n dunno how they could get away with it.

 

https://forum.lowyat.net/topic/2070897/all

 

Adnan Ameen Bakather
by Adnan Ameen Bakather , Founder & Managing Director , Consult & Perform

Shortly, the main difference between the Islamic and conventional products is basically based on contract. Islamic finance contracts can be a sale, partnership, agency... etc but NOT at all a lending/borrowing contract. In addition, the Islamic finance contract should be free from several things. These include RIBA, Gharar (uncertainty, huge risk), Mayser (gambling).

 

These features of Islamic financial products provide attractive options for customers to select from compared with the sole contract of lending. Nonetheless, customers need to carefully the best structure/contract in order to select the best option among several. Moreover, Muslim customers are supposed to select one of these option since it theoretically provide a solution of the Riba contract. 

Mian Muhammad Naeem Jan
by Mian Muhammad Naeem Jan , Chief Finance Officer , Management Company

Profit is not fixed and you can also get some losses thats Halal in islam and Murabaha/Musharika are almost doing same. Muslims should go for Islamic loans

Waqayan Al Waqayan
by Waqayan Al Waqayan , Secretary of Sharia Supervisory Board (SSB) , Ahli United Bank (AUB)

there is no such thing called islamic loan, because islamic finance (transactions) based on sale, lease, partnership and other products which does not contain interest.

meshal mohammed quteshat
by meshal mohammed quteshat , Customer Service , ivoom general trading

Am sure there is another reasons, 

The people prefer to deal with islamic loans , first they feel much peace of mind to deal with it , and the conventional loans have less care and observing from these kind of community.

Subhranshu Ganguly
by Subhranshu Ganguly , Quality Analyst. , WIPRO

Respected SirThough I have a experiance in banking my knowledge about Islamic banking is limited. In India all banking acitivities are regulated by the Reserve bank Of India the Govt controlled bank. This bank has direct control on the lending rates. When there is too much money in the market the central bank manipulates the CRR to increase the bank deposit,fixed deposit /lending rates to mop up the extra cash.

The lending rate to a large extent in India for a loan is fixed by the government ,there could be1-2% difference in EMI due to processing  charges and others.   As the Government wants everyone to own a house tax rebates are given on housing loans.

I have read about how Islamic finance can be introduced in India. But for a multi religois county like India it has tobe advertised and customised for the non Muslim population. Islamic Banking has a double digit growth in Singapore and other Asian countries with mixed populations which is a good sign. Different concepts of Islamic financing-Murabaha-cost plusfinancing,Ijara-Leasing,Mushrarka-joint ventures, could be very popular in india.  The basic benifit of Islamic finance of doing away with the interest rate should be available to all .This could change the banking industry.

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