Conventional bank and Islamic banking as institutions: similarities and differences

Abstract

Purpose – The aim of this paper is to discuss the similarities and differences of both conventional and Islamic financial institutions from various institutional perspectives. Design/methodology/approach – This conceptual paper describes the insights held by the financial institution theory which is discussed from the perspectives of the economics of the financial institution, legal environment, the political aspect of an institution, the philosophical underpinning, the components of institution and also the ethical role of institution. Then, this paper will proceed to justify the similarities and differences that have been observed between both institutions. Findings – Discussions in this paper will reveal that specifically specific similarity is prevalent on the nature of the supervisory role. The differences between both institutions from the aspects of business organization, economic roles and law of origin have also been found. Research limitations/implications – The similarities and differences that are established on both institutions will affect the structure of the financial contract and the design of financial systems. Originality/value – The paper will contribute a new knowledge specifically on the design of the Islamic financial contract based on Shariah law at the initial phase.

Determinants of Islamic banking adoption in Ghana

“…These and other Islamic scholars show empirical evidence that IB and finance should be perceived as a means to poverty alleviation and societal welfare rather than exploitation of consumers and abuse of consumer welfare (Abbas and Shirazi, 2015;Begum et al, 2015;Iqbal and Shafiq, 2015). IB and financial institutions are fundamentally different from conventional banking and financing, as has been widely studied (Abedifar et al, 2015;Hassan and Lewis, 2014;Wan Ibrahim and Ismail, 2015). Wan Ibrahim and Ismail (2015) presents a recent and comprehensive perspective on the Islamic and conventional financial institutions' differences and similarities in terms of business organization, economic roles, law origin and supervisory role.…”

“…IB and financial institutions are fundamentally different from conventional banking and financing, as has been widely studied (Abedifar et al, 2015;Hassan and Lewis, 2014;Wan Ibrahim and Ismail, 2015). Wan Ibrahim and Ismail (2015) presents a recent and comprehensive perspective on the Islamic and conventional financial institutions' differences and similarities in terms of business organization, economic roles, law origin and supervisory role. They maintain that in terms of business organization, IBs make profit from profit-loss sharing transactions, while conventional financial institution make profit mainly from interest charged on lending to customers.…”

An Exploratory Study on Customers’ Selection in Choosing Islamic Banking

“…The factors can be categorized into individual,social, cultural and religious factors (Asdullah and Yazdifar, 2016) as well as institutional factors such as facilities (Amin, 2013), processes and ambiance. Though one can argue that there may be little observable differences between the facilities and services between conventional and Islamic banks, Islamic banks differ substantially in their basic principles and procedures which are heavily based on the teachings of Islam (Wan Ibrahim & Ismail, 2013 With the evidence of growing saving deposit amounts in Islamic banks, it is apparent that people are aware of the existence of Islamic banks in Malaysia. Similarly, the available media news and articles also reported a growth in Islamic banks' performance (Akbar, 2015).…”

Priority Banking Services in Indonesia in Islamic Perspectives

“…The Sharia Bank represented by BSM also offers Priority Banking services. Referring to the differences in the operations of Conventional Banks and Sharia Banks, where savings products mostly use wadiah and mudharabah contracts (Hanif, 2011;Wan Ibrahim & Ismail, 2015).…”