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ISLAMIC BANKING IS "ETHICAL BANKING" WITHOUT INTEREST COMPONENT AND CONVENTIONAL IS "UNETHICAL" AS UNFAIR PRACTICES ARE USED.
ISLAMIC BANKING IS SOURCE ORIENTED BUT CONVENTIONAL BANKING IS RESULT ORIENTED.
ISLAMIC BANKING CONSIDERS "HUMAN" ASPECT BUT CONVENTIONAL IS "PROFIT" ORIENTED.
ISLAMIC BANKING IS ADMINISTERED THROUGH "ISLAMIC SCHOLARS" WHO ARE INSPIRED BY "TAWHEED" ONENESS OF OUR CREATOR..............WHERE AS CONVENTIONAL BANKING IS ADMINISTERED THROUGH INDIVIDIUALS WHO ARE WEALTH HUNGRY MONGERS.
ISLAMIC BANKING TRANSACTIONS ARE FOR SOCIAL DEVELOPMENT IN ACCORDANCE WITH QURAAN AND SUNNAH............... WHEREAS CONVENTIONAL BANKING TRANSACTION WHETHER OR A SMALL SCALE OR INTERNATIONAL LEVEL IS LEAST CONCERNED.
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.
major difference is free from traditional interest and risk is balanced/shared in Islamic banking
The main difference between them is as follows:
Islamic banking is based on real business deals and real economic activities that bear risk and are open to acquire profits while conventional banks are based on Riba (interest) lending and borrowing activities which avoid risk and thus promote social injustice and later leads to economic crises and depressions.
Interest Free and Interest based
Islamic banks differ from conventional banks through finance procedures and services
Where it is Take into account the conditions of Islamic law and must be approved by the Shariah Board.
