There are significant and many differences between the two systems. The Islamic bank do not deal with usury (RIBA) or trade in debt or undertake transactions involving gharar (uncertainty), or sharia non-compliant transactions, as all such acts are prohibited by sharia. The scope of Islamic bank is based on financing or investing in areas that are not prohibited by Islamic law. Additionally, Sharia aims to regulate the exchange of money by converting it into tradable goods or through Ijara and other tools sourced from Islamic jurisprudence.
There are other major differences related to the overall banking system, contracting mechanisms, financing method and others, The Articles of Association is an Islamic bank stipulates that it is forbidden to deal in lending and borrowing with interest. The Islamic Bank is different from conventional banks through the method that money is taken and invested.
Also, the risks associated with Islamic banking contracts are quite different from that of interest-bearing loan contracts of conventional banks.
Islamic Banking Knowledge [394 KB]
