ISLAMIC BANKING VS CONVENTIONAL BANKING

Islamic Banking Vocabulary:

1. Sharia: Islamic law that guides all aspects of Muslim life, including finance.

2. Riba: Prohibited interest or usury in Islamic finance.

3. Mudaraba: Profit-sharing arrangement where one party provides capital, and the other
manages investments.

4. Musharakah: Joint venture or partnership where both parties contribute capital and share
profits or losses.

5. Murabaha: Cost-plus financing, where the bank purchases an asset and sells it to the
customer at a marked-up price.

6. Ijarah: Leasing agreement where the bank owns an asset and leases it to the customer for a
predetermined period.

7. Takaful: Islamic insurance based on the principles of mutual assistance and shared
responsibility.

8. Sukuk: Islamic bonds representing ownership in a tangible asset, project, or investment.

9. Gharar: Excessive uncertainty or ambiguity, discouraged in Islamic finance.

10. Sharia Board: A group of Islamic scholars responsible for ensuring financial products comply
with Sharia principles.

Conventional Banking Vocabulary:

1. Interest Rate: The percentage charged by a lender for the use of money, a key component in
conventional banking.

2. Loan: A sum of money borrowed from a financial institution that must be repaid with
interest.

3. Credit Score: A numerical representation of a person's creditworthiness, used by

conventional banks for lending decisions.

4. Mortgage: A loan for purchasing real estate, secured by the property itself.

5. Central Bank: The primary financial institution that regulates and manages a country's money
supply and monetary policy.

6. Financial Market: A marketplace where buyers and sellers trade financial assets, including
stocks, bonds, and currencies.

7. Securities: Financial instruments, such as stocks and bonds, traded on financial markets.

8. Liquidity: The ease with which an asset can be bought or sold in the market without affecting
its price.

9. Collateral: An asset pledged as security for a loan, which the lender can seize if the borrower
fails to repay.
10. Risk Management: Strategies and techniques employed by banks to identify, assess, and
mitigate risks in their operations.