Islamic Banking vs. Conventional Banking

Becoming an expert in Islamic economics and finance field is one of my long-term goals in life. I started to organize and made a plan towards achieving that dream since senior high school. The concern towards Islamic economics and finance concept, and its application for society and the country began when I was reading a book entitled Islamic banking-theory and practice. After finishing reading the book, my interest in Islamic economic and finance topics rose and strengthen my own determination to become the expert of Islamic economics and finance. The main principle of Islamic economics and finance which offers the just and ethics in economic activity, poverty alleviation through income distribution mechanism, and prevention of economic and

An Islamic financial institution such as financial banking has been established before two or three decades ago in the aim to provide satisfactory financial facilities to the interested parties as compared to conventional banks. In 1974 Dubai Islamic bank which is the first Islamic commercial bank was established and later Islamic Development Bank (IDB) has been established in 1975 (Hennie and Iqbal, 2008).

Almost 80% of respondents were non-Muslims. Therefore these research reports are mostly non-Muslim customer’s opinion on corporate banking Muslim. This study proves that Muslim banking products are not so popular among corporate customers in Malaysia and only a few maintain banking relationships under the Islamic banking system. In addition, nearly 65% of respondents indicated that their knowledge of Islamic banking system is very limited. This study shows that there is a misunderstanding among respondents regarding the objectives of Islamic banking. While 38.1% of respondents were uncertain about the nature of profit sharing system in Islamic banking, 50% believe that this principle is the only principle adopted by Islamic banks as a replacement Riba. Respondents were not familiar with other principles such as Musharakah, Ijarah, Wakala, and Istisna'a. Overall, the conclusions of the study are that there is a general knowledge that inadequate corporate banking products and services to Islam among

Islamic banking refers to a system of banking that complies with Islamic law, also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between the provider of capital (investor) and the user of funds (entrepreneur). In other words, it ensures an equal contribution for all parties involved, whether in profitability or in case of any loss occurred. Activities that involve interest (riba), gambling (maisir) and speculative trading (gharar) are prohibited (Bank Negara Malaysia, 2010). Islamic banking is interest free banking; making it compulsory to take active part in business profit and loss sharing. Islamic banks prefer to take less risk (Shaikh & Jalbani, 2009)

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Actually, this financing office is taking into account the exercises of purchasing and offering. Utilizing this agreement, the Islamic bank may back the client who wishes to get a given resource however to concede the installment of the advantage for a particular period or to pay by portion. The advantage that the client wish to buy for instance, are purchased by the bank and sold to client at a concurred cost. A concurred cost will incorporate the bank's imprint up benefit. When the bank and client focus the residency, the way of the portions will then be closed. The client is moreover permitted to settle installment inside a preagreed period in a knot whole. The cost at which the bank offers the property will incorporate the genuine expense of the advantage and will likewise join the bank's net revenue. There is no hobby charged and the additional value repays the bank for its benefit. Portions stay settled over the time of the contract and no conformity is made if interest rates

There are challenges in the Malaysian sukuk market. An important component for the growth of Islamic capital markets is the conception of a secondary selling platform for the capital market instruments. This will supply investors with flexibility in supervising their liquidity requirements. The creation of a continuous supply of Islamic papers and instruments need to advertise them greater depth in the market. There also necessarily to be greater diversity in the type and maturity of the sukuk in the market for Islamic financial institutions and portfolio managers to supervise their funds effectively. The Malaysian government regularly issues sukuk with different maturities in order to produce a benchmark yield curve. Another challenge to the growth of the market cares pricing issues. For the Islamic security to be efficiently priced and believable, further initiatives need to be undertaken to originate its own indicator. It would then fluctuate depending on the demand and supply for that property. It will then give a true reflection of the price of the underlying asset (Aziz, 2007).

the First International Conference on Islamic Banking, held in Dubai in 1979, it has not been widely implemented throughout Islamic financial system (Bendjilali and Khan,1995, p. 16). It is a relatively new and very little used product available for Islamic banks. The paper claims that MMQ is more in line with Shari’ah teachings and as such should be used more by Islamic financial institutions. The study indicates that MMQ possibly has a comparative advantage for both financiers and the customer when compared with

Shahjanaz Kamaruddin begins this article by stating that Malaysia has developed into becoming a full-fledged Islamic financial system operating in parallel to its conventional counterpart. Islamic finance is based on the Islamic principle of Syariah which is relevant in today’s world. According to the Islamic Finance Development (IFD) Report 2014, Malaysia is the undisputed in sukuk(bond) with a 63% of global market share. Malaysia performs very well across 5 indicators which are quantitative development, knowledge, governance, CSR (corporate social responsibility) and

Islamic Capital Market is a major part of the overall Islamic Financial System especially in providing the component of liquidity to the otherwise illiquid assets. One of the most popular instruments used today in Islamic Capital Market is Sukuk. The structures of Sukuk based on Ijarah, Musharakah, Mudharabah and hybrid forms have evolved. Under any circumstances, these innovations have appeal to many Shari’ah issues and arguments. Therefore, this article aims at analyzing the challenges of realizing Maqasid al-Shari’ah in the Islamic capital market, focusing on sukuk instrument. In particular, this study evaluates on the approach of one of the most popular sukuk structure, namely, sukuk al-Ijarah in the light of the perspective of Maqasid

Islamic banking also provide the knowledge of Riba (interest) Hibha (gift) wadiah (safe keeping) ijarah ( lease , rent , wage) deposit product investment product and financing product (debt based) financing product (equity based ) trade finance

The shari’ah compliance finance has gained huge popularity among Muslim and non Muslim countries. The Islamic banking and finance has significantly increased an average of 20% to 30% over the last decade and it’s expected to grow fast for the coming years. Despite its fast growing globally and the increasing number of the shari’ah compliance financial institutions, the Muslim minorities in Sweden have no access to any financial service adherent to their religion principles. They are left behind without any functioning Islamic finance institution. Therefore, the Muslim minorities in Sweden are constrained obtaining loans from the Swedish conventional banks as the banks are non shari’ah compliance banks.

The financial sector in some Sub Saharan Africa countries has been growing rapidly in the past two decades. New products have been introduced and financial institutions are playing an tremendous role in financial intermediation, including cross-border financial flows. However, Islamic finance in Sub Saharan Africa remains small, although it has potential given the region’s demographic structure and potential for financial expanding. As of end-2012, about 38 Islamic finance institutions comprising commercial banks, investment banks, and takeful1 (insurance) operators were operating in Africa (Dow Jones, 2012). As estimates based on Bank scope and Zawya, April 18, 2012 out of

The prosperity and peace of a society much or less depends on its economy. While for the smooth running of both, there are several instructions in Islamic Shariah and allows what is right and forbids what is wrong. When we talk about financial issues, Islamic Shariah strictly condemns Riba. The question may arise why Islam prohibits Riba? While it was already in practice before the advent of Islam and still it is a part of different economic systems throughout the world. It is simply because Islam gives respect to human beings and condemns all the attempts that are harmful and disgraceful for humanity. Therefore, Riba is not only forbidden in Islam but economic experts are also in search of its substitute. Since borrowing on interest rate creates several issues including: less efficient allocation of resources, indebtedness, unemployment and economic instability. While in society it causes injustices, inequity, poverty and imbalance etc. In this paper we are discussing how Riba causes imbalance in the society and instead Riba what Islam demands from its followers.

We conduct a raft of additional tests to ensure the robustness of our findings. First, our sample consists of Islamic banks, commercial banks and dual banks, thus to ascertain how MLG work among the three categories, we re-run equation (1) by separating the sample to three sub-samples: Islamic banks (IBs); commercial banks (CBs); and dual banks (DBs). The results reported in models 2, 3, 4 in Table 6 and models 11, 12 and 13 in Table 7 respectively. The results are basically the same with slight different in the coefficients significant. Nevertheless there is negative impact of GOWN on risk disclosure however this relation is insignificant. Also the results show the FOWN and CC has more impact in IBs rather than CBs and DBs. Finally, the