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Banking and Finance Difference
Banking and Finance Difference
Finance
Assignment
Program : BSCM
Section : F-19
Submitted to:
Ma’am Mehwish
Submitted by:
Ayesha Hamid L1F17BSCM0024
Difference between Banking and Finance
BANKING FINANCE
Duties and functions of conventional banks The functions and operating modes of Islamic
are entirely based on the principles of man banks are based on the principles of Sharia.
Traditional banks are trying to maximize The Islamic banking seeks to maximize profit
their profits without any restrictions. subject to the restrictions of Sharia.
Traditional banks do not process or pay the Islamic banks pay zakat and to play a role as a
zakat. collection of zakat.
Borrowing money and to get back to Islamic banks are involved in the partnership
increasing the interest rate is central to contract and to participate accordingly.
traditional banks.
In case of default, the bank worth of Islamic banks have no provision to charge
conventional and compound interest. extra money for non-compliance. Only a
small contribution and these returns will be
donated to charity. Discounts have already
been given a solution of the Bank’s
discretion.
Very often, this translates into the bank’s To ensure growth with equity, Islamic banks
interest becomes important. He makes no give importance to the common good.
effort to ensure growth with equity.
Because of its fixed income accounts, not Islamic banks to pay more attention in project
paying too much attention to project appraisal and evaluation, as the mechanism
evaluation and assessment. for profit sharing.
Conventional banks focus more on the Islamic banks place greater emphasis on
credit history of customers. strengthening and project feasibility.
Relationships with traditional banks and The status of Islamic bank in relation to their
their customers that creditors and debtors customers, partners, investors and sellers, the
buyer and seller.
A conventional bank must guarantee all Islamic banking can not guarantee the
deposits. deposits of the deposit, depositors are
guaranteed repayment of the funds, but if the
account is based on the concept Mudarabah,
the customer has accounted for the loss of
status.
Conventional Banking
• Conventional Banking is Price money
• Is based on fixed return on both sides of balance sheet
• Does not involve itself in trade and business
• Depositors get a fixed rate regardless of the bank’s profitability. Thus
insulating them from the banks true performances
Islamic Banking
• Islamic Banking prices goods and services which creates real wealth in the
society leading to economic well-being
• It based on profit sharing on deposit side and on profit on assets side
• Actively participate in trade and productions profits are shared with the
depositors, higher the bank profits higher will be the depositors income