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Banking
Bank
An establishment authorized by a government to accept
deposits, pay interest, clear checks, make loans, act as an
intermediary in financial transactions, and provide other
financial services to its customers.
A banker is a person who carries on the business of banking.
The legal definition of the business of banking is
Conducting current accounts for customers
Paying to the customer's order (e.g. the customer's
cheques drawn on the bank), and
Collecting the cheques deposited to the customers's
account, as the customer's agent and crediting the
proceeds to the customer's current account.
Islamic Banking
Islamic banks adhere to the
concepts of islamic law, islamic
banking revolves around many
well established concepts which
are based on islamic canons.
Islamic banking refers to a system
of banking or banking activity
that is consistent with islamic law
(sharia)principles and guided by
islamic economics
Principles of Islamic
banking
Conventional Banking
Functions and operating modes of
conventional banking are based on fully man
made principles
The investor is assured of a predetermined
rate of interest
It aims at maximizing profit without any
restriction.
Lending money and getting it back with
compounding interest is the fundamental
function of the conventional banks
Sources of funds
ISLAMIC BANKS
CONVENTIONAL
BANKS
Current accounts
Current accounts
Saving accounts
Reserves
. Sources of funds
ISLAMIC BANKS
CONVENTIONAL
BANKS
Current accounts
Current accounts
Uses of Funds
ISLAMIC BANKS
Cash & balances with other
banks
Sales Receivables
(Murabaha, Salam, Istisnaa)
CONVENTIONAL
BANKS
Cash & balances with other
banks
Loans
Investment securities
Mortgages
Musharaka financing
Financial leases
Mudaraba financing
Securities
Criticism
Differences between
Islamic Banking and
Conventional Banking
Islamic banking
Conventional banking