Question

Question 1: Briefly discuss the types of deposit products of Islamic banking. How far such products are similar and different that the deposit products of conventional commercial banking?

Answer 1

Types of deposit products of Islamic Banking. . Deposit on Mudharabah ( profit sharing) . Deposit on Wadiah ( safe keeping) . Musharakah ( joint venture) . Murabahah( cost plus finance) . Ijar( leasing) . Hawala ( an international fund transfer system) . Takaful ( Islamic insurance) . Sukuk ( islamic bonds)

Similarities

. Both type of institutions ( islamic and conventional) are providing financing to productive channels for reward.

Differences

The difference lies in financial agreements. Conventional banks offer loan for a fixed reward while islamic financial institutions cannot do that because they cannot charge interest. . Islamic banks earn their money by profit and loss sharing, trading, leasing, charging fees for services rendered, whereas conventional banks earn their money by charging interest and fees for their services . The depositors from conventional banks recieve profit of their investment in the form of pre determined interest rate irrespective of banks performance but in Islamic Banking depositors receive their return depending solely on the banks performance.