 Islamic law (Sharia’h) principles

 guided by Islamic economics.

 Conventional banking is based on the
principle that the more you have, the more
you can get.
 Importance of Trade in Islam
Islam has given an immense
importance to trade

The nobility of this profession is

obvious from the fact that it was the
chosen profession of prophet
Muhammad (PBUH).
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.
 Conventional banking practices are
concerned with "elimination of
risk" where as Islamic banks "bear the risk"
when involve in any
transaction.
ISLAMIC: CONVENTIONAL:

promotes risk sharing predetermined rate of

between provider of interest. 
capital (investor)

maximizing profit but maximizing profit without

subject any restriction. 
to Shari’ah restrictions. 

small amount of  charge additional money

compensation 
DIFFERENCE BETWEEN ISLAMIC AND
CONVENTIOANL BANKING
Islamic Conventional
Banking Banking

1) Functions 1)Functions and

operations are
and operations
based on fully
are based on man made
Sharia’h principles
principles
 DIFFERENCE BETWEEN ISLAMIC AND
CONVENTIOANL BANKING
Islamic Banking Conventional
Banking
2) Promote risk-
sharing between 2) Investor is
provider of capital assured of pre-
(investor) and user determined rate of
of funds interest
(entrepreneurs)
DIFFERENCE BETWEEN ISLAMIC AND
CONVENTIOANL BANKING
Islamic Banking Conventional
Banking
3) Aim at
maximising profit 3) Aim at
but subject to maximising profit
Sharia'h without any
restrictions restrictions
 DIFFERENCE BETWEEN ISLAMIC AND
CONVENTIOANL BANKING
Islamic Banking Conventional
Banking
4) Partners,
investor and 4) Creditor-Debtor
relationship
traders, buyer or
seller relationship
 DIFFERENCE BETWEEN ISLAMIC AND
CONVENTIOANL BANKING
Islamic Banking Conventional
Banking
5) Encourage 5) Basaed on money
asset-based trading. Money is a
medium of exchange
financing and and not a
based on commodity, its sale
commodity and purchase is
prohibited in Islam.
trading
 DIFFERENCE BETWEEN ISLAMIC AND
CONVENTIOANL BANKING
Islamic Banking Conventional
Banking
6) No right of profit
if there is no risk 6) It is almost risk
involved. The profit free banking and
and loss sharing depositor has no
depositor may lose risk of losing its
money in case of money because
loss. interest is
guaranteed.