Question

2. How do you think bank used their sources of fund? (Your answer must be at least 300-300 words)

and please answer it based on Islamic banks.. thanks

Answer 1

Islamic banks raise funds in different sources. The first and most used source is that issuing of equity. This is the best way to raise funds and this will be very helpful for the banks for raising capital. When the bank started its operation then they can issue shares and through that they can raise funds. Then we know the other source that raising funds through the bank deposits. Here there will be no interest for the islamic banks and they are doing fund transfer process and this can be considered as the source of fund. Apart from these there are also other kind of special investments are accepted by islamic banks so that they can use this money for their transaction purpose.

The difference of islamic banks from another bank is that they can not recieve and pay interest on the loans and deposits. So that whn we are looking into the balance sheet of islamic banks we can understand that both are looks like same but there are many difference. We can not find interest income in their balance sheet. So they are missing these kind of income and can not use this as a source of funds. Here also islamic banks provide current accounts and savings account. Customers can make their investment in any of these. The interest and yield is the only problem here. For islam it is prohibited to recieve or pay interest. So that islamic banks following a strict strategy in this. Thats why they are mainly concentrate on other kind of investment policies which are usually following the mudaraba principle. Then the other way is that giving this funds for making other transactions. It means they are generate revenue through utlising this funds.  So that we can see that islamic banks concentrate in different methods and policies as the sources of funds.

ThankYou.........