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    Rehan Dhami Fa16 Bba 151

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    This document contains an assignment response comparing the key differences between Islamic and conventional banking. The response provides examples of differences in their balance sheets, such as Islamic banks using terms like "Islamic financing and related assets" instead of "advances" and not charging interest. It also explains differences in how deposits are handled, with conventional banks paying interest on savings deposits but Islamic banks only sharing profits and losses with some depositors. The response analyzes sample balance sheets from an Islamic and conventional bank to highlight these distinctions and justify them based on Islamic principles forbidding interest.

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    Rehan Dhami Fa16 Bba 151

    Uploaded by

    Rehan Dhami
    49 views5 pages
    This document contains an assignment response comparing the key differences between Islamic and conventional banking. The response provides examples of differences in their balance sheets, such as Islamic banks using terms like "Islamic financing and related assets" instead of "advances" and not charging interest. It also explains differences in how deposits are handled, with conventional banks paying interest on savings deposits but Islamic banks only sharing profits and losses with some depositors. The response analyzes sample balance sheets from an Islamic and conventional bank to highlight these distinctions and justify them based on Islamic principles forbidding interest.

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    difference of Islamic and commercial bank banking

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    This document contains an assignment response comparing the key differences between Islamic and conventional banking. The response provides examples of differences in their balance sheets, such as Islamic banks using terms like "Islamic financing and related assets" instead of "advances" and not charging interest. It also explains differences in how deposits are handled, with conventional banks paying interest on savings deposits but Islamic banks only sharing profits and losses with some depositors. The response analyzes sample balance sheets from an Islamic and conventional bank to highlight these distinctions and justify them based on Islamic principles forbidding interest.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    49 views5 pages

    Rehan Dhami Fa16 Bba 151

    Uploaded by

    Rehan Dhami
    This document contains an assignment response comparing the key differences between Islamic and conventional banking. The response provides examples of differences in their balance sheets, such as Islamic banks using terms like "Islamic financing and related assets" instead of "advances" and not charging interest. It also explains differences in how deposits are handled, with conventional banks paying interest on savings deposits but Islamic banks only sharing profits and losses with some depositors. The response analyzes sample balance sheets from an Islamic and conventional bank to highlight these distinctions and justify them based on Islamic principles forbidding interest.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    COMSATS UNIVERSITY ISLAMABAD,

    LAHORE CAMPUS

    Assignment No. 2

    SUBMITTED TO

    Dr. M Waheed Akhter

    ASSISTANT PROFESSOR

    DEPARTMENT OF MANAGEMENT SCIENCES

    SUBMITTED BY

    Muhammad Rehan Dhami

    CIIT/FA16-BBA-151/LHR

    NOVEMBER 09, 2019


    Assignment No. 2
    List the key differences that exist between Islamic and conventional banking. Compare and
    contrast the balance sheets of a selected sample Islamic and conventional bank, highlight
    the key differences and justify them, using suitable reasons. Words Limit: Font: 800-1000,
    Times Roman, Font Size: 12"

    ANSWER
    Key differences that exist between Islamic and conventional banking
    conventional banks Islamic banks
    Conventional banks work on the bases of Islamic banks work on the bases of Shariah
    conventional laws. principles of Islamic law.
    Maximizing the profit on the bases of interest Maximizing the profit on the base of profit and
    base system. loss sharing system.
    Shifting risk on customer, when they involved Bearing risk with customer, when they
    in any transection. involved in any transection.
    Guarantee all its deposits, because risk is Guarantee all deposits of current account, but
    shifting on customer. So Conventional banks saving account is based on shared risk of
    don’t have any possibility of loss. That’s why investment so Islamic banks do not provide
    they provide guarantee all its deposits. any guarantee on deposits of saving accounts.
    Predetermine rate of retune is offered by the Rate of retune is not Predetermine, return is
    bank. based on the performance of Mudarabah base
    business in which banks invest the money of
    depositor.
    Provide lone in cash and charge fix interest Do not provide lone in cash.
    rate from customer.
    Borrowers take lone against their properties Bank and borrower co-invests in a property. A
    and borrower is liable to pay a fixed interest borrower pays fixed rent and some portion of
    charges for taking loan, if anything happens principal amount in instalments and slowly
    with the property borrower bear the loss. buys ownership from bank, in case of any
    crash, both borrower and bank bear the lose up
    to the extent of their ownership.
    Balance sheets of Islamic bank.
    Balance sheets of conventional bank.

    Key differences in balance sheet of Islamic banking and conventional banking:


    After comparing the financial statements of Dubai Islamic banking and Allied banking, there are some
    differences which are as follow.
    Due from financial institutions
    One and the difference is that the Islamic bank uses it because of financial institutions, which include
    commodity marabahs, by-laws, practitioners and orbiters. In these terms the proportion of the sale
    price and the contribution to profit and loss are already known. While traditional banks have used the
    term lending to finance terms, it includes sales under repurchase and purchases under resale. Markup
    or interest in both terms is not known and there is no clear. And even the duration of the contract is not
    known in some terms. The interest rate is calculated according to the country's economic situation.
    This will create difficulties for the parties and countries as well. Therefore, the Islamic system is better
    in which the parties are aware and fix the price at the time of the sale agreement. This can't be changed.
    And also do not create problems for countries and parties.
    Islamic financing and related assets
    The first difference is that Islamic banks used Islamic finance and their associated assets in their assets
    section. These are products manufactured by the Bank and consist mainly of Marabha, Running
    Advisory, Wakala, Wakila Isthmutra, and Istna Kim Wakala, Tashahara, Islamic Export Refinance
    Scheme and Partnership. This is a general statement of the general and specific provisions. While
    traditional banks have used the term development. Advancement includes loans / advances and net
    investment in financing. This is basically an income that comes from leasing interest on commodities
    and money. Islamic banking conditions are good because it does not charge interest like traditional
    banks. And interest is forbidden and also disturbs the country's economic system.
    Assets
    In conventional banks the term assets means the things which they can use for the future economic
    benefit. Borrowers take lone against their properties and borrower is liable to pay a fixed interest
    charges for taking loan, if anything happens with the property borrower bear the loss. While in
    the Islamic banks the assets have different meanings. Assets mean the things which we have the legal
    right to hold or use for the specific purpose. Bank and borrower co-invests in a property. A borrower
    pays fixed rent and some portion of principal amount in instalments and slowly buys ownership
    from bank, in case of any crash, both borrower and bank bear the lose up to the extent of their
    ownership.
    Subordinate Sukuk
    Sukuk subcontracted the money initially received. Profit accrued on a subordinate score is received in
    the profit and loss account. While traditional banks have used the term sub division loan. This is the
    amount that is guaranteed as security when a bank fails to make a loan or go bankrupt.
    Deposits
    In the conventional banking the deposits are current deposits, fixed deposits and saving deposits and
    profit and loss account. While in Islamic banks there are only two modes of deposits. These are Qard
    and Modaraba. Qard is the basically the current deposits and modaraba is the saving account/deposits.
    The conventional banks give the interest to the depositors to the saving deposits while share the risk
    i.e. profit and loss with only profit and loss accounts holders.

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