Comparison Between Islamic Banking and Conventional Banking

Topics: Bank, Islamic banking, Fractional-reserve banking Pages: 4 (1257 words) Published: November 26, 2010
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Comparison between Islamic Banking and Conventional Banking

As far as commercial banking is referred, there are two main differences from the traditional approaches (conventional or Islamic), and these are very significant evolutions. One is that this method believes commercial banks as serving providers, rather of like “money lenders” (conventional) or “investing-collaborators” (Islamic). Interest-free banking is inferred as a sub-model; the conventional banking is considered as an “inflation-free” sub-example of the common model. These differences make possible one to wipe out riba from the method without recurring to radical evaluations, and still have an entirely executable method attuned with the conventional one. Successively, this characteristic creates the new method easy to empathize and to explicate, and hence easy to enforce in all countries. The philosophic re-orientation, technical adaptations, and the re-training of staff needed for the transformation above from the conventional to the anticipated method are also least. More significantly, the new perspective produces commercial banking translucent, interest-free or not.

Muslims are disallowed by their religion to conduct in interest (riba) in whatsoever means. Contributing and getting as well as observation are all banned. Therefore an Islamic banking method cannot give any interest to its investors; neither can it require or obtain any interest from the receivers. Nor could the banks observe or hold accounts of these dealings. Simply the lender is permitted to the return of his funds fully. This is a Qur’anic enjoining. The suggested method abides by with these central Islamic essentials. A fundamental dogma of commercial banking is funds assurance. The funds trusted to the bank by an investor must be brought back to him fully. The anticipated method totally follows with this necessity. Islamic...
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