Conventional Banking

Conventional banking is based on the principle that the more you

have, the more you can get. In other words, if you have little or
nothing, you get nothing. As a result, more than half the population of
the world is deprived of the financial services of the conventional
banks. Conventional banking is based on collateral. Conventional
banks look at what has already been acquired by a personConventional
banks go into ‘punishment’ mode when a borrower is taking more time
in repaying the loan than it was agreed upon. They call these
borrowers “defaulters”. When a client gets into difficulty, conventional
banks get worried about their money, and make all efforts to recover
the money, including taking over the collateral. In conventional banks
charging interest does not stop unless specific exception is made to a
particular defaulted loan. Interest charged on a loan can be multiple of
the principal, depending on the length of the loan period.

Islamic Banking Vs Conventional Banking

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The main difference between Islamic and conventional banking is that
Islamic teaching says that money itself has no intrinsic value, and
forbids people from profiting by lending it, without accepting a level of
risk – in other words, interest (known as "riba") cannot be charged.
To make money from money is prohibited – wealth can only be
generated through legitimate trade and investment. Any gain relating
to this trading are shared between the person providing the capital and
the person providing the expertise.
At Islamic Bank of Britain, we generate all our profit through sharia’acompliant trading and
investment activities. We then share the profitswith our customers at a pre-agreed ratio. In
order to share profits youmust hold one of our savings or investment accounts
There are two major difference between Islamic Banking and
Conventional Banking:
1. Conventional banking practices are concerned with "elimination of
risk" where as Islamic banks "bear the risk" when involve in any
transaction.
2. When Conventional banks involve in transaction with consumer they
do not take the liability only get the benefit from consumer in form of
interest whereas Islamic banks bear all the liability when involve in
transaction with consumer. Getting out any benefit without bearing its
liability is declared Haram in Islam.
While the basics of what the business is are the same, the term refers
to operating the business within Islamic law. The main thing that
effects this business under that law is that Islam prohibits the charging
of interest. Certainly a problem in modern banking!
However, what is considered to be interest has different definitions by
different Islamic scholars...some say it can only be considered on gold
and silver...but paying back the same weight as you borrowed (the
same weight of paper money for example), is not interest. Like in all
religious things, there would seem to be some conflict and differences
between followers that may seem strange to outsiders.
So basically, modern Islamic banking may take many forms, each of
which strives to adhere to it's understanding of Islamic law