CASE STUDY

WHY PEOPLE OPEN AN INVESTING ACCOUNT IN

ISLAMIC BANK RATHER THAN IN CONVENTIONAL BANK
Business Ethics
by
Col. Raza Kamal

Shujaat Hussain Qureshi (5137)

ISLAMIC BANKING

Islamic Banking is banking activity that is

consistent with the principles of Shariah Law.
Sharia Law prohibit the interest or fees (riba or
usury)
Investing in that business who are providing
goods and service which is contrary on Islam is
also Haram.
Islamic Banking is continously growing year by
year.

Jordan Islamic Bank is the first Islamic Bank

which is established in 1978 by Dr. Sami Hassan
Homoud.
Islamic Banking is based on Islamic faith which
says that stay within the limit of Islamic laws or
Shariah law in all of its action and deeds.

PRICIPLES OF ISLAMIC BANKS:

The governing principles of an Islamic bank are

a)

The absence of interest-based (riba)

transactions.

b)

The introduction of an Islamic tax, zakat

c)

The discouragement of the production of goods

and services which contradict the Islamic value
(haram).

TRANSACTION IN ISLAMIC BANKS

1.
2.
3.
4.
5.
6.
7.
8.

Variety of Islamic transactions:

Mudarabah
Musharakah
Murabaha
Istisnaa
Ijarah
Baia al-Salam
Sukuk
Bank Account

CONVENTIONAL BANKING

CONVENTIONAL BANK

A conventional bank is a type of financial

institution and intermediary.
In this banking system, lends money and provides
transcational, savings, and investing
They give return on the investing or saving in the
form of interest.
In conventional bank, they give loans to their
customer for the car financing or other use but
bear the interest on their loans.

CONVENTIONAL BANKING

Lending money from their customer and getting bac

with compounding interest and it is also the
fundamental function of the conventional banks.
Conventional banks engage in the following activities:

a)

Ending money by overdraft, installment loan, or

other means.

b)

Banks also resell loans to other parties to acquire

more cash to lend. The borrower will payback to the
new owner of the loan.

TRANSACTIONS IN CONVENTIONAL
BANKS

1.
2.
3.
4.
5.

Variety of Conventional transactions:

Lending money into a bank account
Withdrawing money
Adding interest on withdraw
Direct debits (Online Transfer)
Deducting bank charges

COMAPRISON BETWEEN ISAMIC

BANK AND CONVENTIONAL BANK
Islamic Bank

Conventional Bank

Th e principles and fucnctions of

Islamic Banks are totally based on
Islamic Shariah.

The priciples and functions of

conventional banks are fully based
on the manmade principles.

Risk share only the investor not the

Bank.

The investor is assured of a

predetermined rate of interest.

In the modern Islamic banking

system, Islamic banks became a
Zakat Collection Centre and they
also pay out their Zakat.

It does not deal with Zakat

Participation in partnership
business is the fundamental function
of the Islamic banks. So they have to
understand their customer's

Lending money from their customer

and getting bac with compounding
interest and it is also the
fundamental function of the

COMPARIOSN BETWEEN ISLAMIC

BANK AND CONVENTIONAL BANK
Islamic Bank

Conventional Bank

The Islamic banks give greater

emphasis on the viability of the
projects which the customer invest.

The conventional banks give greater

emphasis on credit-worthiness of
their customers

The status of Islamic bank in

relation to its clients is that of
partners, investors and trader,
buyer and seller.

The status of a conventional bank,

in relation to its clients, is that of
creditor and debtors.

Islamic bank can only guarantee

A conventional bank has to
deposits for deposit account, thus
guarantee all its deposits.
the depositors are guaranteed
repayment of their funds, however if
the account is based on the
mudarabah concept.

CONCLUSION

Conventional banking practices are concerned

with "elimination of risk" where as Islamic banks
"bear the risk" when involve in any transaction.
In transaction, Conventional Banks take the
liability form their customers but they do not get
the benefits to their customer 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.

Because of these points people are start investing

in Islamic Bank with open an investing account
instead of commercial Banks.

QUESTIONS ?

QUESTIONS?

Customer know that there is no loss sharing

concept in Islamic Banks so, Why did they open
an investing account in Islamic Bank?
What do you think Isamic Banking Concept is
right as compare to the Conventional Bank?
Where do you see Islamic Banks in next five
years? Will the Islamic Bank beat the
Convetional Banks?