Question

Discuss briefly tow similarities between Islamic banking and conventional bank

Answer 1

Islamic banking :

This Islamic banking is based on the Islamic principles . It is also called as Islamic Finance. The growth of these banks mainly depends upon the rising economies of the Muslim countries,especially those that have benifited from the rising prices of oil. the main two fundemental principles of Islamic Banking are sharing of profit and loss, and the prohibition of the collection and payment of interest by lenders and investors. These banks usually makes profits through equity participation , which requires borrower to give the bank share as the profits rather than paying interest. This banking is grounded with the islamc faith relating to commercial transactions.The employees of these banks are entrusted with not deviating from the fundemental principles of Qur'an while conducting the business.

Conventional Banking :

Conventional banks borrow money from depositors at low interst rates and lend them to investors at high interst rates. Interest is forbidden in Islam and therefore Islamic banks enter into profit sharing arrangements with both depositors and borrowers.Some conventional banks have windows or sections that provide Islamic banking services to their customers. One of the primary difference between Islamic banking and Conventional banking is that Islamic banking prohibits Usury and Speculation.

Conventional banking practices are concerned with "elimination of risk " where as islamic banks "bear the risk " when involved in any transaction. When Conventional banks involve in tranaction with consumer they do not only take the liability , they also get the benefit of interest from consumers. Whereas Islamic banks bear all the liability while involving consumer in any tranaction.Getting out any benefit without bearing its liability is declared Haram in Islam.