Name Tayyab Saleem

Date 31st may 2022

Topic Commercial Banking Vs

Islamic Banking.

Commercial Banking Vs Islamic

Banking.
Bank

A bank is the financial institution which accepts deposit from public and makes
loan for the person who needed.

Commercial Banks

A commercial bank is the financial institution which accepts deposits from the
public and gives loans for the purpose of consumption and investment to make
profit

Islamic Banks

Islamic banking is the banking that complies with Sharia and its practical
application through the development of Islamic economics.

Commercial Banking
The overall job of business bank is to offer monetary types of assistance to
the overall population and business, gathering financial and social soundness and
supportable development of the economy.

In this regard, credit creation is the main capacity of business banks. While
endorsing credit to a client that doesn’t give money to borrower. All things doing
equal , they open a store account from which the borrower can pull out . As such,
while endorsing a credit they naturally make store.

In commercial banking the rate of return for deposit is fixed that is known as
interest that is not allowed in Islam. That is the main reason the most of the Islamic
countries not accept the commercial banking because that are against the laws of
Islam and sharia.

In commercial banking the instruments are used for financing are

Partnership, Joint Venture, Current Account, saving Account, Etc

Islamic Banking
Islamic banking is the grounded in the tenets of the Islamic faith as they
relate to commercial transection. The principles of Islamic banking are derived
from Quran, the central religion text of Islam. In Islamic banking, all transection
must comply with sharia the legal code of Islam based on the teaching of Quran.
The rules that govern commercial transection refer to as fiqa al mumalat.

The difference between commercial and Islamic bankingis the Islamic

banking prohibits usury and speculation. Sharia strictly prohibits any form of
speculation or gambling, which is referred to as maisir. Also , any inverstment
involved items or substances that are forbidden in Quran including Alcohol
Gambling and Pork are also prohibited. In this way Islamic banking can be
considered a culturally distinct form ethical investing.

Financing instruments in Islamic banking consist of equity like and debt like
instrument. Fixed claim instruments including murabaha, ijarah, salam, and istisna.
Sukuk is the asset back trust certificate the ownership of an assets or usufruct
based on the principle of sharia.