Assignment on Islamic Banks and Conventional Banks Differentiate

Added on - 22 Jul 2020

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How Islamic Banks andConventional BanksDifferentiate
TABLE OF CONTENTSResearch Topic.......................................................................................................................1Background of the study.........................................................................................................1Research Aim.........................................................................................................................1Objective of the study.............................................................................................................1Significance............................................................................................................................1Rationale.................................................................................................................................2Literature Review...................................................................................................................2Research Methodology...........................................................................................................3CONCLUSION................................................................................................................................4REFERENCES................................................................................................................................5
Research TopicThe topic of this dissertation proposal is to differentiate Islamic banks and conventionalbanks.Background of the studyThe Islamic and conventional banking are different from each other as conventionalbanking follows man made principle whereas Islamic banks follows shariah principles(Difference between Conventional and Islamic banking). In contrary to this, they accept depositsfrom public and also lend to the borrowers. The interest rate is the main source of profit orincome for the conventional banking whereas it is prohibited in Islamic banks as it is againstshariah rules.The investment in alcohol, tobacco are forbidden in the Islamic banks. The conventionalbanks are forbidden to purchase goods for the reselling purpose such as buying fixed assets. TheIslamic banks contain partnership contract which is referred as Mushraka which is same as inconventional banks have partnership between two or more parties. In partnership, allocation ofloss or profit is determined in advance only and not based on capital contributed by thecontractual parties.Research AimThe aim of this research is to distinguish between conventional and Islamic banksObjective of the studyTo differentiate between Islamic and conventional bankingTo highlight and analyse the main principles of both the banksSignificanceThe significance of this research is to make out the main underlying differences betweenIslamic and conventional banks which is related to principles, sustainability, business andincluding interest rates (Waemustafa and Sukri, 2015). They both differentiate from each otheron the grounds of interest rates as it is forbidden under Islamic banks whereas in conventionalbanks, it is not prohibited. Moreover, the principles which conventional banks follows is manmade principles which are commonly followed by banks. In contrary to this, Islamic banksfollow the rules based on shariah which prohibits the interest as the source of income and as1
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