1. ISLAMIC & CONVENTIONAL
BANKING SYSTEM
Atif Hassan - 1435
Muhammad Zakria - 1448
Saqib Ali - 1452
Similarities and differences
2. WHAT IS BANK.?
Bank is a financial institution which accept money from the public for
the purpose of landing OR investment repayable on Demand OR
otherwise withdraw-able by Cheques, Drafts or order.
3. ISLAMIC BANKING SYSTEM
Islamic banking system is according to the concept of the sharia.
There is not the involvement of the fixed amount of the interest in
this banking system. In this banking system there is not involvement
of the interest which is called the riba. Islamic banks mostly provide
the assets to the customers instead of lending them the money.
4. CONVENTIONAL BANKS
The concept of the conventional bank was emerged from Italy. Then
this concept grew after the commercial revolution of the High Middle
Ages from 1000 to1350. By the early modern period however banking
spread throughout Europe and became complex and increasingly
involved in credit transactions. These are the banks which are
operating on the international level and have the broad scope all over
the world. It is the banking system in which the loans are given on
the fixed interest rate.
5. SIMILARITIES AND DIFFERENCES
BETWEEN TWO BANKING
SYSTEMS:-
There are both the similarities between the Islamic and the
conventional banking system. Both type of banks are operating in the
almost same society and the functions which they are performing
those are almost similar but they ways in which they are performing it
is different. Islamic banking system follows the rules made by the
shariah while the conventional banks operate under the manmade
rules and the regulations.
6. SIMILARITIES AND DIFFERENCES
•As Islamic banking system is the emerging concept due to this reason
they have the branch network which is limited to the Muslim
countries where the Muslims are in the majority while the
conventional banks are spread all over the world.
•The skills and the expertise of the employees of the Islamic banks are
limited as compared to the employees of the conventional banking
system.
•There is the high risk involved in the Islamic banking system as they
operate as a partner and the risk is shared by both the client and the
banks while in case of the conventional banking system there is the
7. SIMILARITIES AND DIFFERENCES
•Deposits are collected from savors both by the conventional and the
Islamic banks.
•In Islamic banking system there is the involvement of the risk sharing
sometimes the depositors have to bear the loss
•Banks which are operating under the Islamic banking system they do
not deal in the fixed amount of return on the deposits which is also
called the Riba. While in the conventional banking system there is the
provision of the fixed interest rate which is predetermined.
8. SIMILARITIES AND DIFFERENCES
•In Islamic banking system there is the involvement of the risk sharing
sometimes the depositors have to bear the loss as well while the
conventional banks provides the higher return to the depositors
which is guaranteed.
•Both the banks provide the credit facility to the customers but the
difference is in the way of the treatment.
•Islamic banks do not deal in interest they can only give the interest
free loans to the customers they deal in commodities which means
that these banks provide the required asset to the customers and
then charge the rent on these assets while the banks operating under
the conventional banking system charge the fixed amount of interest
from the customers.
9. SIMILARITIES AND DIFFERENCES
•In case of the default the conventional banks will charge the penalties
from the customers but in case of the Islamic banking system banks
cannot make these penalties as a part of their earning.
•In case of the agriculture loans conventional banks charge interest
while the Islamic banks do not charge interest they enter in the
contract under the Bai Salam Bai Musharka Mudarba and Murabha
contracts.
10. TYPES OF ISLAMIC BANKING
•Musharka (partnership on profit and loss sharing).
•Mudarbah (equity participation).
•Murabaha (trade financing or purchase & sale on mark-up in price).
•Ijarah (long term investment).
•Bai Bil Ijara (hire-purchase)
