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    SYED MANSOOR ALI SHAH
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    This document compares conventional and Islamic banking. It notes that Islamic banking prohibits interest and invests according to Islamic principles, focusing on equal distribution of wealth and social justice. It outlines the different modes of financing like murabaha and ijarah that Islamic banks use, as well as the challenges they face regarding regulations, human capital, and standardization. The document then provides a comparative study of the two systems based on their objectives, features, principles, functions, and social responsibilities. It concludes that Islamic banking aims to conform to Islamic rules while upholding both profits and moral principles.

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    This document compares conventional and Islamic banking. It notes that Islamic banking prohibits interest and invests according to Islamic principles, focusing on equal distribution of wealth and social justice. It outlines the different modes of financing like murabaha and ijarah that Islamic banks use, as well as the challenges they face regarding regulations, human capital, and standardization. The document then provides a comparative study of the two systems based on their objectives, features, principles, functions, and social responsibilities. It concludes that Islamic banking aims to conform to Islamic rules while upholding both profits and moral principles.

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    22 views11 pages

    Islamic Banking

    Uploaded by

    SYED MANSOOR ALI SHAH
    This document compares conventional and Islamic banking. It notes that Islamic banking prohibits interest and invests according to Islamic principles, focusing on equal distribution of wealth and social justice. It outlines the different modes of financing like murabaha and ijarah that Islamic banks use, as well as the challenges they face regarding regulations, human capital, and standardization. The document then provides a comparative study of the two systems based on their objectives, features, principles, functions, and social responsibilities. It concludes that Islamic banking aims to conform to Islamic rules while upholding both profits and moral principles.

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    of 11

    X`

    COMPARATIVE STUDY BETWEEN


    CONVENTIONAL AND ISLAMIC
    BANKING

    Salman Ghanchi SP19-MBAP-0100


    Syed Mansoor Ali Shah SP19-MBAP-0062
    Hunain Ali Banani FA18-MBAR-0026
    INTRODUCTION

    – What is Islamic Banking?

    Islamic banking is an interest free banking system and is governed by the


    principles laid down by Islamic Sharia'h. Commonly Islamic modes used
    for saving deposits is Mudharaba and Qarz for current deposits while
    Murabaha, Ijarah, Diminishing Musharakah and other modes used for
    financing.
    – What is Conventional Banking?

    Conventional banks are in the business of lending & borrowing money


    based on interest. Islamic Banks are not money lending institutes but
    they work as a trading / investment house. In Conventional Banks almost
    all the financing and deposit side products are loan based.
    Differences Between Conventional and
    Islamic Banking:

    The most important difference between the traditional


    banking systems and Islam is that the Islamic bank
    prevents interest and sells it. The law prohibits all forms of
    guessing or gambling, called maisir. The law also prohibits
    us from taking interest on loans. Business or investment
    related to investment is not permitted in the Qur'an,
    including gambling on pigs and pigs. Therefore, Islamic
    banking can be seen as a cultural advantage as a way of
    investing morally.
    Why Islamic Banking

    The Primary objectives of Islamic Economic System are as


    under.
     Equal Distribution of wealth
     Social justice
    These objectives can never be achieved in Interest/Riba
    based economic systems.
    Mode of Banking in Islamic and
    Conventional Banking

     Islamic Banking
    a) Murabaha
    b) Ijara
    c) Mudarabah
    d) Musharakah
    e) Bai Salam
    Mode of Banking in Islamic and
    Conventional Banking

     Conventional Banking
    a) Term Financing
    b) Lease Financing
    c) Overdraft (OD)
    d) Revolving Credit
    e) Clean/unsecured financing
    Comparative Study Between
    Conventional &
    Islamic Banking
    1. Comparisons on the basis of Objectives
    2. Comparisons on the basis of Features
    3. Comparisons on the basis of Principles
    4. Comparisons on the basis of Functions
    5. Comparisons on the basis of Social Responsibility
    6. Comparisons on the basis of Deposit
    7. Comparisons on the basis of Investment
    8. Comparisons on the basis of Accounting
    Challenges Facing by Islamic Banking

    • Regulatory and tax reforms


    - Stamp duties
    - Tax incentive for investors
    - Regulatory reserves and capital requirements
    • Human Capital
    • Investment Avenues
    • Standardization of Contracts
    • Perception of Users
    • Benchmark
    Conclusion

    • The development of philosophies and objectives in Islamic banking are


    in line with principles of Islamic business as highlighted in the al-Quran
    and Sunnah.
    • As institutions whose foundations are based on Islamic doctrines,
    Islamic bank must conforms to Islamic rules and regulations.
    • Islamic business entities are required to engage themselves in legitimate
    and lawful business, and to fulfill all obligations and responsibilities.
    • Islamic bank have to uphold both profit and moral principles.
    Thank You

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