Difference Between Islamic Banks and Conventional Banks
Difference between Islamic Banks and Conventional Banks
The conventional financial system focuses primarily on the economic and financial aspects of transactions, the Islamic system places equal emphasis on the ethical, moral, social, and religious dimensions, to enhance equality and fairness for the good of society as a whole. The system can be fully appreciated only in the context of Islam's teachings on the work ethic, wealth distribution, social and economic justice, and the role of the state.
Some of the differences between the Islamic Banks and the Conventional
Banks
The following is a brief discussion in which we list the fundamental differences in the nature of work between the Islamic and conventional or commercial banks: First, traditional or commercial banks are intermediate financial institutions which stand between the savers and the investors12 . On the other hand, Islamic banks are a mixture of internationally known traditional financial institutions for they not only operate like saving banks but are also similar to finance companies in so far as they can offer financial support to high risk projects.
Furthermore, they can operate as open or closed investment funds [or banks].
Second, the form of the Islamic bank and the form of the conventional bank:
The Islamic bank is more than the conventional bank for it works like any other specialized bank, (such as industrial banks, agricultural banks or building societies). It finances projects in all the above mentioned fields in addition to the fact that it can work like any investment bank because it is interested in the establishment of long-term projects.
Third, conventional banks do not get involved in the buying and selling or even the keeping of commodities, only within certain conditions. Also these banks, in accordance with their charters, can not buy capital assets or fixed assets unless they are used by the bank itself13. As for Islamic
The conventional financial system focuses primarily on the economic and financial aspects of transactions, the Islamic system places equal emphasis on the ethical, moral, social, and religious dimensions, to enhance equality and fairness for the good of society as a whole. The system can be fully appreciated only in the context of Islam's teachings on the work ethic, wealth distribution, social and economic justice, and the role of the state.
Some of the differences between the Islamic Banks and the Conventional
Banks
The following is a brief discussion in which we list the fundamental differences in the nature of work between the Islamic and conventional or commercial banks: First, traditional or commercial banks are intermediate financial institutions which stand between the savers and the investors12 . On the other hand, Islamic banks are a mixture of internationally known traditional financial institutions for they not only operate like saving banks but are also similar to finance companies in so far as they can offer financial support to high risk projects.
Furthermore, they can operate as open or closed investment funds [or banks].
Second, the form of the Islamic bank and the form of the conventional bank:
The Islamic bank is more than the conventional bank for it works like any other specialized bank, (such as industrial banks, agricultural banks or building societies). It finances projects in all the above mentioned fields in addition to the fact that it can work like any investment bank because it is interested in the establishment of long-term projects.
Third, conventional banks do not get involved in the buying and selling or even the keeping of commodities, only within certain conditions. Also these banks, in accordance with their charters, can not buy capital assets or fixed assets unless they are used by the bank itself13. As for Islamic