Course Title: Introduction to Islamic Banking &

Finance

Assignment

Program : BSCM

Section : F-19
Submitted to:
Ma’am Mehwish

Submitted by:
Ayesha Hamid L1F17BSCM0024
 Difference between Banking and Finance
BANKING
 Banking help in managing day to day
transactions like accepting demand and
offering loans.  financial research, stocks, venture
 regulated only by RBI
 banking services accept deposits
 banking is about directing liquidity
 Banking is about borrowing money
from individuals and corporate, giving
it out as loans to the real sector, and
keeping the spread. Here loans are the
main source of profits, and the guessing
is mainly about the quality of the
borrower.
 banks create credit
 The banking industry is highly
regulated and is subject to stringent
laws, rules and requirements.
 scope of business of the bank is limited
Difference between Islamic and conventional banking systems
Duties and functions of conventional banks
are entirely based on the principles of man
There is a predetermined rate that is
guaranteed to the investor.
FINANCE
 Financial services, include a much
broader range like insurance , pensions,
capitals , hedge funds, mutual funds, etc
 regulated not only by RBI, but also
other financial market regulators like
SEBI, IRDAI, PFRDA
 financial services don’t accept deposits
 Finance is about the settlement of
documents
 Finance is basically about “buy low sell
high” no matter what you trade and with
whom. Finance includes a lot of
guessing over the future prices of assets,
but rarely gives out loans to the real
firms, and certainly does not have those
loans as the main source of profits.
 do not create credit
 The financial services industry doesn’t
follow much the laws and regulations as
banking industry.
 there is various type of business
regarding financial activities
The functions and operating modes of Islamic
banks are based on the principles of Sharia.
Islamic banking promotes risk sharing
between provider of capital (investors), and

Traditional banks are trying to maximize
their profits without any restrictions.
Traditional banks do not process or pay the
zakat.
Borrowing money and to get back to
increasing the interest rate is central to
traditional banks.
In case of default, the bank worth of
conventional and compound interest.
Very often, this translates into the bank’s
interest becomes important. He makes no
effort to ensure growth with equity.
Borrowing in the money market is
relatively easier in the traditional banking
sector.
Because of its fixed income accounts, not
paying too much attention to project
evaluation and assessment.
Conventional banks focus more on the
credit history of customers.
user of funds (entrepreneur).
The Islamic banking seeks to maximize profit
subject to the restrictions of Sharia.
Islamic banks pay zakat and to play a role as a
collection of zakat.
Islamic banks are involved in the partnership
contract and to participate accordingly.
Islamic banks have no provision to charge
extra money for non-compliance. Only a
small contribution and these returns will be
donated to charity. Discounts have already
been given a solution of the Bank’s
discretion.
To ensure growth with equity, Islamic banks
give importance to the common good.
Islamic banks should be based on Sharia
committee is independent in itself.
Islamic banks to pay more attention in project
appraisal and evaluation, as the mechanism
for profit sharing.
Islamic banks place greater emphasis on
strengthening and project feasibility.
Relationships with traditional banks and
their customers that creditors and debtors
A conventional bank must guarantee all
deposits.
The status of Islamic bank in relation to their
customers, partners, investors and sellers, the
buyer and seller.
Islamic banking can not guarantee the
deposits of the deposit, depositors are
guaranteed repayment of the funds, but if the
account is based on the concept Mudarabah,
the customer has accounted for the loss of
status.