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CASE STUDY

“WHY PEOPLE OPEN AN INVESTING ACCOUNT IN
ISLAMIC BANK RATHER THAN IN CONVENTIONAL BANK”
Business Ethics
by
Col. Raza Kamal

Shujaat Hussain Qureshi (5137)

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ISLAMIC BANKING     Islamic Banking is banking activity that is consistent with the principles of Shariah Law. . Islamic Banking is continously growing year by year. Sharia Law prohibit the interest or fees (riba or usury) Investing in that business who are providing goods and service which is contrary on Islam is also Haram.

  Jordan Islamic Bank is the first Islamic Bank which is established in 1978 by Dr. Islamic Banking is based on Islamic faith which says that stay within the limit of Islamic laws or Shariah law in all of it’s action and deeds. . Sami Hassan Homoud.

b) The introduction of an Islamic tax.PRICIPLES OF ISLAMIC BANKS:  The governing principles of an Islamic bank are a) The absence of interest-based (riba) transactions. zakat c) The discouragement of the production of goods and services which contradict the Islamic value (haram). .

4. 2. 7. 8. 6.TRANSACTION IN ISLAMIC BANKS  1. 5. Variety of Islamic transactions: Mudarabah Musharakah Murabaha Istisna’a Ijarah Bai’a al-Salam Sukuk Bank Account . 3.

CONVENTIONAL BANKING .

CONVENTIONAL BANK     A conventional bank is a type of financial institution and intermediary. . In conventional bank. and investing They give return on the investing or saving in the form of interest. savings. In this banking system. they give loans to their customer for the car financing or other use but bear the interest on their loans. lends money and provides transcational.

b) Banks also resell loans to other parties to acquire more cash to lend. The borrower will payback to the new owner of the loan.CONVENTIONAL BANKING   Lending money from their customer and getting bac with compounding interest and it is also the fundamental function of the conventional banks. . Conventional banks engage in the following activities: a) Ending money by overdraft. or other means. installment loan.

2. 4. 5. 3.TRANSACTIONS IN CONVENTIONAL BANKS  1. Variety of Conventional transactions: Lending money into a bank account Withdrawing money Adding interest on withdraw Direct debits (Online Transfer) Deducting bank charges .

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COMAPRISON BETWEEN ISAMIC BANK AND CONVENTIONAL BANK Islamic Bank Conventional Bank Th e principles and fucnctions of Islamic Banks are totally based on Islamic Shariah. The investor is assured of a predetermined rate of interest. Islamic banks became a Zakat Collection Centre and they also pay out their Zakat. So they have to understand their customer's Lending money from their customer and getting bac with compounding interest and it is also the fundamental function of the . In the modern Islamic banking system. The priciples and functions of conventional banks are fully based on the manmade principles. It does not deal with Zakat Participation in partnership business is the fundamental function of the Islamic banks. Risk share only the investor not the Bank.

however if the account is based on the mudarabah concept. .COMPARIOSN BETWEEN ISLAMIC BANK AND CONVENTIONAL BANK Islamic Bank Conventional Bank The Islamic banks give greater emphasis on the viability of the projects which the customer invest. The status of a conventional bank. Islamic bank can only guarantee A conventional bank has to deposits for deposit account. the depositors are guaranteed repayment of their funds. buyer and seller. investors and trader. The conventional banks give greater emphasis on credit-worthiness of their customers The status of Islamic bank in relation to its clients is that of partners. thus guarantee all its deposits. in relation to its clients. is that of creditor and debtors.

In transaction. Getting out any benefit without bearing its liability is declared Haram in Islam. Conventional Banks take the liability form their customers but they do not get the benefits to their customer whereas Islamic banks bear all the liability when involve in transaction with consumer. .CONCLUSION   Conventional banking practices are concerned with "elimination of risk" where as Islamic banks "bear the risk" when involve in any transaction.

 Because of these points people are start investing in Islamic Bank with open an investing account instead of commercial Banks. .

QUESTIONS ? .

Why did they open an investing account in Islamic Bank? What do you think Isamic Banking Concept is right as compare to the Conventional Bank? Where do you see Islamic Banks in next five years? Will the Islamic Bank beat the Convetional Banks? .QUESTIONS?    Customer know that there is no loss sharing concept in Islamic Banks so.