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Comparitive analysis of islamic and conventional bank risk

April 3, 2016 | Author: | Posted in finance, mathematics and economics

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Comparative Analysis of Islamic and Conventional Bank Risk

The decline of the religion has been attributed into modern times with a materialistic culture by the popular wisdom of today , the understanding of religion has embedded this view , as nature having only spiritual limits , and the worldly well being of an individual is very detached in this relation

However , this understanding of Islam religion has been misguided by many of among us in the past , as well as in the present [banner_entry_middle]

. A critical role has been played by every religion regarding the guidance to survive in a society communally , and in the characterization of different markets of that time

In the religious regards , equal distribution of wealth and debt annulment was preached and emphasized by every religion in the past . The enforcement of the debt bond has been strongly rejected by all the beliefs and the concept of canceling the debt have been upheld by them

In the past , in to satisfy and fulfill the financial needs of devout and pious Muslims , a concept of money depository was introduced in the Islamic civilization , which has now become a growing phenomenon of the world , that is , around 1 .6 billion Muslims in the world

The macro-economic properties of banking institution have been studies by many economists with relation to an ideal and isolated Islamic economy framework . In modern days , the working of this pioneering financial system is going on very effectively in various parts of the world . In many developed and under-developed countries , the other conventional banking systems are having this unique financing system besides them in every sector of the economy

In this regard , the comparative analysis has been done in this study which will try to differentiate the Islamic banking system with the Conventional ones . In this study , we will try to understand and clarify the demarcation between the Islamic and Conventional Banking and the risks that are borne by these methods of banking

A financial intermediary having the aims and objectives related to the principles of Islamic law or `Shariah ‘ may be defined as an Islamic Banking System . Consequently , the zero-interest activities and operations are the key features of this distinctive banking system However , eliminating the transactions based on interest is not the only objective of Islamic banking . The abolishment of all kinds of exploitation is also another aspect of Islamic banking system . In result , a balanced and unbiased social is established by the system in this regard

Only the role of financier is not played by an Islamic bank . It also works as a partner in the business of an individual . Due to this , the risk between the capital owner and the entrepreneurs is involved by this system . However , the positive result of the collective efforts is also shared by the Islamic banking

Thus , the other conventional banking and interest-based system differs from the Islamic banking , as only the entrepreneur or the owner of the capital bears… [banner_entry_footer]

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