Suppose you have experienced two types of banks one being Islamic and the other one as...

Suppose you have experienced two types of banks one being Islamic and the other one as conventional. Based on this;
(a) What key differences and major issues of both types would share with your friend?
(b) What main reasons would you emphasize in order to help your friend to either choose Islamic or conventional bank?

Expert Solution

(a)

Difference	Islamic Bank	Conventional Bank
Objective	The objective of islamic bank is to work as a trading concern	The objective of conventional bank is to generate income as financial intermediary
Risk sharing	Risk is shared among borrower,lender and bank	Risk is fully shared to others
Relationship	The relationship between islamic bank and customer is one of participation in risks and rewards	The relationship between the bank and customer is that of debtors and creditors.
Business framework	Based on shariah laws and ensure islamic laws are adhered with proper guidance of sharia scholars	Secular banking laws and not based on religous laws or guidelines
Profit	Maximizing profit but subject to shariah laws.	Maximizing profit with out any restriction
Sharing of loss	Loss is shared when the organisation suffers loss	There is no concept of sharing loss

(b)In my personal opinion i would suggest you to choose Islamic bank over conventional bank because they are showing better performance and also follow the principle of financial justice and encourages stability in investments and accelerating the development and also losses are shared.

Rahul Sunny answered 7 months ago

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