INTRODUCTION

• Islamic Finance is a system that is based on Islamic Law (Shariah)

and principles.
• It is a unique system of banking or banking activity that is different
from the conventional banking.
• Not restricted to be used among Muslims only, also can be used by
non-Muslims.
• Malaysia is one of the Islamic countries that practices a dual
banking system meant by conventional and Islamic financial
system run parallel in a country.
• To meet the short term and long term banking needs of the
customers.
 CHARACTERISTIC
Prohibition Prevention of Prohibition
of RIBA GHARAR of MAYSIR
(interest) (uncertainty) (gambling)

The prohibition The introduction

of conducting Prohibition of a religious levy
economic or of monopoly or alms-giving
investment which (zakat)
are unaccetable

Co-operation for
the benefit of
society
OBJECTIVES OF ISLAMIC FINANCE

Promotes
Stability of the
principle of
currency
brotherhood

Promotes the Promotes the

concept of highest level of
amanah governance and
transparency
 Stability of the • In Islamic financial system, money is not a commodity as is the
currency case with the conventional financial system

• The Islamic financial system also promotes principle of

Promotes principle
of brotherhood brotherhood and co-operation through partnership, equity-
based financing and risk sharing
• Islamic finance is more to community-oriented and entrepreneur-friendly,
emphasizing on productivity and physical expansion of economic production and
services.
Promotes the
• Hence, it shifts from the pre-dominant practice of focusing on financial collateral or
concept of amanah financial worth of the borrower to the entrepreneur’s trustworthiness and project
viability and usefulness.

• As an Islamic finance shaped and governed by the values and philosophy of

Promotes the Shariah, Islamic finance naturally promotes the highest level of governance and
highest level of transparency. Man is not the absolute owner of the resources, but rather he is
governance and entrusted with them and may utilize them only for the betterment of mankind.
Therefore, wealth is entrusted upon the human indeed a responsibility that he will
transpareny accounted for in the Hereafter.
 SIMILARITIES BETWEEN ISLAMIC &
CONVENTIONAL FINANCE
1. Deposits are collected from savers under both type of
institutions for reward irrespective a bank is operating under
conventional system or Islamic system.

2. Both type of institutions are providing financing to productive

channels for reward.
DIFFERENCES BETWEEN ISLAMIC & CONVENTIONAL FINANCE
COMPARISON

BASIS OF CONVENTIONAL
ISLAMIC FINANCE
DIFFERENCE FINANCE
Religious Belief Separate religion from other Belief in unity of God and relates this
parts of human life belief to economic life of a man

Ultimate Owner Individual ownership Allah is the exclusive owner. Man is the
caretaker of the property

Goal of financial system Aimed for profit Welfare of both here and thereafter

Wealth distribution Unequal Equitable

Basis of Economic system All transactions are based on All transactions are interest-free.
interest

Sources of system Human intellectual and logical Based on Al Quran, Sunnah, Ijma’ &
Qiyas
THANK
YOU