ISLAMIC BANKING FRAMEWORK - COMPARISON
WITH CONVENTIONAL BANK
Islamic Banking & Finance - Global growth trends
Islamic Banking and finance growth has generated considerable
interest in the financial world in recent years. The concept of
Islamic banking has received encouraging response from different
corners of the globe as one discovers its ideological dimensions
and practical significance.
Given its ability to offer innovative financial solutions for basic
financial needs in under-served markets especially in the Muslim
world and to meet complex financial requirements of the modern
times, it is seen as a socially responsible and ethical banking
model with considerable growth potential. In the Muslim world
and increasingly in the West, significant segments of the
institutional and retail markets are choosing Islamic finance for
their financing and investment needs. Islamic financial system
also draws it strength from it being asset backed nature and
directly linkage to the real economic transactions and avoidance
of any element of interest and speculative activity.
Understanding the difference
When we look at the differences between Islamic Financial
Institutes and the Interest-based conventional Institutes, we find
out that the differences are on three levels:
1. Conceptual and Socio-religious level
2. Business model and Governing framework
3. Product Level Implementation
Without a clear understanding of these differences, some people,even experts tend to make a common mistake of equating Islamic
banks with other conventional banks with mere change of name.