Islamic & Conventional Banking

1. Islamic & Conventional Banking Sara Riaz 06-0016

2. Banking • Bank A bank 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.

3. 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

4. Principles of Islamic banking • Prohibition of riba (interest) • Profit sharing (mudharabah) • Safekeeping ( wadiah) • Joint venture ( musharakha) • Cost plus ( murabahab) • Leasing ( ijarah )

5. 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

6. State Bank of Pakistan & Its Role In Islamic Banking • In order to promote Islamic Banking in Pakistan, State Bank is following a three pronged strategy as under: I) Establishment of full-fledged Islamic bank(s) in the private sector;II) Setting up of subsidiaries for Islamic Banking by existing commercial banks; and III) Allowing Stand-alone branches for Islamic banking in the existing commercial banks.

7. Criticism

8. Differences between Islamic bank and conventional

10. Which One is Better?? Islamic or Conventional Banking