Basic Differences Between Islamic and Conventional Banking

BASIC DIFFERENCES BETWEEN ISLAMIC AND CONVENTIONAL BANKING. v Functions according to the shariah law v Conventional Banks assure a pre-determined rate of interest. V Absence of Interest based v Only aims at maximizing profit. transactions. v Avoidance of Economic Activities involviing Opres- sion. v One of the basic functions of a conventional bank is to make money by giving loans on compounding interest. Islamic Banking V Avoidance of Economic Activities involviing Speculation. Conventional Banking v Introduction of Islamic Tax (Zakat) v Penalty for defaults goes into the bank's pockets. v Concerns the customer's credit worthiness when v Haram goods and services are prohibited. giving loans. v Penalty charged on defaults is given to certain NGOS. v Concerns the viability of the project when investing for partnership.