Similarities and Differences Between Islamic Banking and Conventional Banking
Content
Introduction 1
How Islamic banking system is different from conventional one? 1
Maintenance of CRR/SLR: 4
Project appraisal and evaluation: 4
Basis for collection of deposit 5
Moral Dimension 5
Emphasis on Productivity as compared to credit worthiness 5
Scope of the activities: 6
Guarantee for deposit: 6
Distributive justice and economic stability: 7
Allocate Efficiency: 7
Stability of banking system: 8
Growth of the banking system: 8
Emphasis on the character of the loan applicant: 8
Conclusion 10
References 10
Introduction
Banking system plays a very important role in the economic life of the nation. The health of the economy is closely related to the soundness of its banking system. In a developing country like Bangladesh the banking systems as a whole play a vital role in the progress of economic development. Modern trade and commerce would almost be impossible without the availability of suitable banking services. Islamic Banking is an integral part of Islamic Economics and thereby an Islamic way of life. Islamic Banking is a special nature of financial intermediary which has not involve in any way with interest. The introduction of interest-free and equity-based financing by the Islamic banking system is based on the principles of Islamic economics.
On the other hand, conventional banking is essentially based on the debtor-creditor relationship between the depositors and the bank on one hand, and between the borrowers and the bank on the other. Interest is considered to be the price of credit, reflecting the opportunity cost of money.
How Islamic banking system is different from conventional one?
Islamic Bank system & conventional Bank system can be compared by identifying similarities and differences between both of the banks.
a) Similarities ➢ Both are governed by the general rules of the regularity authority covering establishment, control and
Introduction 1
How Islamic banking system is different from conventional one? 1
Maintenance of CRR/SLR: 4
Project appraisal and evaluation: 4
Basis for collection of deposit 5
Moral Dimension 5
Emphasis on Productivity as compared to credit worthiness 5
Scope of the activities: 6
Guarantee for deposit: 6
Distributive justice and economic stability: 7
Allocate Efficiency: 7
Stability of banking system: 8
Growth of the banking system: 8
Emphasis on the character of the loan applicant: 8
Conclusion 10
References 10
Introduction
Banking system plays a very important role in the economic life of the nation. The health of the economy is closely related to the soundness of its banking system. In a developing country like Bangladesh the banking systems as a whole play a vital role in the progress of economic development. Modern trade and commerce would almost be impossible without the availability of suitable banking services. Islamic Banking is an integral part of Islamic Economics and thereby an Islamic way of life. Islamic Banking is a special nature of financial intermediary which has not involve in any way with interest. The introduction of interest-free and equity-based financing by the Islamic banking system is based on the principles of Islamic economics.
On the other hand, conventional banking is essentially based on the debtor-creditor relationship between the depositors and the bank on one hand, and between the borrowers and the bank on the other. Interest is considered to be the price of credit, reflecting the opportunity cost of money.
How Islamic banking system is different from conventional one?
Islamic Bank system & conventional Bank system can be compared by identifying similarities and differences between both of the banks.
a) Similarities ➢ Both are governed by the general rules of the regularity authority covering establishment, control and
References: • https://openknowledge.worldbank.org • www.ijbssnet.com • www.ibtra.com • www.zaharuddin.net • www.kantakji.com • www.scribd.com [pic]