COMPETITIVE ADVANTAGE WITHIN THE GLOBAL ECONOMY

Running head: COMPETITIVE ADVANTGE WITHIN THE GLOBAL ECONOMY
Competitive advantage within the global economy
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COMPETITIVE ADVANTGE WITHIN THE GLOBAL ECONOMY
Comparing and contrasting the Sharia banking and Saudi financing management
practices with western banking and financial management practices:
Sharia Banking is often termed as Islamic banking which is increasingly gaining
prominence in the western world. In case of traditional banking it makes use of the western
policies however the sharia banking makes us of the Islamic policies and rules in the banking
sector. Governed by the Sharia Advisory Board, the Islamic banks are comprised of the
Islamic scholars and clerics ensuring that all the banking practices carried out in the Islamic
banking are carried out under the law od Sharia. Under the law of Sharia, the practices which
are carried out in the banking sectors are under the proponents of Islam, as governed by the
Holy Quran. Also, it makes sure that the practices which are carried out are free from any
exploitation and must under the Islamic code of ethics (Ilieva et al., 2017). The sharia law is
based on carrying out all the activities in the strict compliance with the Islamic banking
system, which is based on the belief of the radical elements of Islam. The most significant
difference in between the western financial management and the Islamic financial
management is that, in case of the sharia banking which is practiced the Saudi government
which prohibits the collection of interests in all the kinds of monetary transactions and the
donations for the services provided in the name of charging the capital or the principle which
are deposited. Structured under the ethics of Islam the sharia banking makes sure that the
banking practices are an integral part of the moral society including the distribution of
wealth, however it is found to be in contrast with the western banking culture where there is
unequal wealth distribution and also exploitation of others is involved in making profits in the
name of interest deposited for the principle amount (Yulianto & Solikhah, 2016). The Islamic
board advisory which is comprised of the clerics and the scholars, coming from the radical

COMPETITIVE ADVANTGE WITHIN THE GLOBAL ECONOMY
elements of the Islam are found to promote the violence against the west particularly against
the culture of class division and unequal wealth distribution. The Sharia banking claims to get
rid of the social problems and bring about a fairer and equitable society (Bitar et al., 2017). It
can broadly be explained in the underlying key points upon which the Sharia banks works
which lies in contrast with the western banking and financial management:-
1) The banking practices must be free from all interest, whereas in western banking culture
bank can only function if it promises to prioritise the customers.
2) It must ethically directed, however the conventional is regardless of any religious ethics.
3) Any form of trade in relation to the genuine need of fund in its ethical form so it is found
to be equity related. However funds which involve any kind of trading including liquor, pork
and any other sector lying in the unlawful deeds are strictly prohibited. Therefore, the product
profit is earned from a mark-up rather than the any interests earned on the amount at a risk.
Unlike the Sharia banking in the western banking culture the interest are solely earned
by the mathematical formula that is linked to the cash. The conventional or the western
financial culture is based on the different concept where the profit on the investment is
guaranteed however this is not followed by the Sharia banking system (Jawadi et al., 2017).
Identifying difficulties encountered by Saudi companies in the countries not following
the Shariah practice:
Saudi companies operating in any western countries that is well organized and has
appropriate funding and marketing management has to face some challenges in their
operation when it comes to financing the activities. Such companies faces issues such as
unavailability of services which hinders their operations and it is difficult to upgrade the
financial system due to lacking qualified scholars. Any kind of decision and actions are

COMPETITIVE ADVANTGE WITHIN THE GLOBAL ECONOMY
dependent upon the Islamic laws and the absence of such qualified scholar even makes it
difficult to address the problems faced by the Saudi companies operating in western
countries. One of the greatest challenge faced by the companies using Islamic banking
products in the market development is lack of awareness as the western banking system in
western countries are much more informatory compared to the Islamic banking (Trendowski
et al., 2018). Furthermore, Saudi companies relying on the Islamic banking faces the issue of
wide credit gap and this results in making Muslim population unrepresented in the financial
services context.
There a number of challenges which are faced by the Saudi company in doing
business alliance with the companies practicing the western banking practices. As, it is
known that the Sharia banking involves the practice of the divine law obtained from the Holy
Quran, done with a general agreement of Muslim Scholars and the analogical deductions
which re obtained from the Islamic law. The sharia banking forbids what is known as maysir
which, involves the contract in which the ownership of any goods is dependent upon the
uncertain events that might happen in the future or occurrence of any situation which was
predetermined and gharar respectively. The sharia banking also avoids any investments in the
things which are forbidden in Islam for example pork and alcohol (Setiawan, 2019).
There also exist the multicultural issues along with the unequal treatment of equity
and debt poses another challenge to the companies. Saudi companies faces difficulties in
promoting the confidence of investors of the western countries because of lack of
transparency in terms of documentation, distribution of profits and compliance with the both
Shariah and rules of government. For such companies, there exist a dearth of credit rating
agencies which again results the investors oozing their confidence in such companies. Some
other serious issues facing the firms of Saudi are non-existing secondary market,

COMPETITIVE ADVANTGE WITHIN THE GLOBAL ECONOMY
underdeveloped primary market and lacking interest free instruments (Abdullrahim &
Robson, 2017).
References list:
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choice of an Islamic or non-Islamic bank account. Journal of Financial Services
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Azmi, A., Non, N., & Ab Aziz, N. (2017). Challenges to Shariah equity screening, from
Shariah scholars’ perspective. International Journal of Islamic and Middle Eastern
Finance and Management.
Bitar, M., Hassan, M. K., & Walker, T. (2017). Political systems and the financial soundness
of Islamic banks. Journal of Financial Stability, 31, 18-44.
Ilieva, J., Ristovska, N., & Kozuharov, S. (2017). Banking without interest. UTMS Journal of
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Jawadi, F., Jawadi, N., Ben Ameur, H., & Idi Cheffou, A. (2017). Does Islamic banking
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COMPETITIVE ADVANTGE WITHIN THE GLOBAL ECONOMY
Yulianto, A., & Solikhah, B. (2016). The internal factors of Indonesian Sharia banking to
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