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The similarities between Islamic and the conventional banking system
Similarities between conventional banking and Islamic banking
Similarities conventional and Islamic Banking
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In the Islamic Law (the Charia), you cannot pay a fix interest rate, named “Riba”, as a remuneration for the capital. Indeed, the money should not “work” alone but nothing in the Charia forbid the remuneration of the assets bought thanks to the capital lent. The inner principle the many interdictions concerning the money lending in the Islamic Law is that money has no inherent value in itself, only the human work should be rewarded.
Islamic financial contracts are conceived to facilitate the financing according to Islamic standards.
The Islamic finance appeared at the beginning of 1960s with the aim of developing alternative financial contracts conform to the Sharia. Before the 60’s Islamic Finance existed but without solid institution it could not expend itself. The creation of the first Islamic social bank, Mit Ghamr Islamic Bank in Egypt in 1963, and the first Islamic commercial bank, Dubai Islamic Bank in 1975 set up this problem. This financing system remained quite unknown until a few years ago, when the risks taken in the classical global finance led into a global crisis.
In a first part we will study why the Islamic finance is really different from classical finance, then why it could be one alternative for the classical finance, and finally we will see that this financing model is not a panacea for all the problems in our current financing system.
I) In what Islamic Finance is so different from the current global finance?
The sociologists agree to say that the process of the modernization of the society is due to the separation of the different spheres (economical, artistic, legal…) from the religion. This process called secularization is the foundation of our society: “saeculum” in Latin means “century” and what i...
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... finance won’t overcome the current model but only be a part of it. Indeed, the classical finance has a big propensity to consider alternatives model like a niche market. The Islamic finance I still young, and lot of experimentations and researches will be necessary before it can play an important part in the worldwide finance. The risk is that the Islamic Finance loses a part of its ethics principles as developing itself. Indeed, even if the gambling is theorically forbidden by the Sharia, one can always build a system avoiding the rule, like it is actually the case with the Salam contract: a short term contract allowed by the Sharia, where the seller realizes a profit from a decline in value of the asset.
Works Cited
:” It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
The secularization paradigm Bruce argues ‘is a set of associated explanations rather than a single theory’ (Pg.43). To build on this argument Bruce provides us with a diagram of the secularization paradigm with 22 key contributing factors; some showing the religiosity of societies i.e. the protestant reformation and monotheism, some exploring other factors which have contributed towards secularization such as Industrial Capitalism, Technological Consciousness and Social Differentiation and he provides an explanation of these concepts in order to provide the reader with an analysis of these themes. This can however be problematic in the sense that the terminology of the paradigm may well be understood by individuals studying or in the field of sociology but for individuals who are looking to develop their knowledge on the debate of secularization and religion can make this difficult. Bruce argues that modernization is one of the main causes of secularization. ‘‘Modernization brought with it increased cultural diversity in three different ways. First populations moved and brought their language, religion and social mores with them in a new setting. Secondly, the expansion of the increasingly expansive nation state meant that new groups were brought into the state. But thirdly…modernization created cultural pluralism through the proliferation of classes and class fragmentation with increasingly diverse
―"Religion in “Brave New World“." Religion in Brave New World. N.p., n.d. Web. 07 May 2014.
Roles of the Catholic Church in Western civilization has been scrambled with the times past and development of Western society. Regardless of the fact that the West is no longer entirely Catholic, the Catholic tradition is still strong in Western countries. The church has been a very important foundation of public facilities like schooling, Western art, culture and philosophy; and influential player in religion. In many ways it has wanted to have an impact on Western approaches to pros and cons in numerous areas. It has over many periods of time, spread the teachings of Jesus within the Western World and remains a foundation of continuousness connecting recent Western culture to old Western culture.-
The contemporary Church is so often a weak, ineffectual voice with an uncertain sound. It is so often the arch-supporter of the status quo. Far from being disturbed by the presence of the Church, the power structure of the average community is consoled by the Church's silent and often vocal sanction of things as they are.”
Should this dilemma arise, whether or not the promise is kept must depend upon the particular circumstances of the case. Choosing not to keep a promise in such a situation would be not a demonstration of the promiser's inability to keep his word, but a clear indication of his quite proper awareness that, in deciding what course to take, the promiser has quite properly concluded that the interest of others must be placed before his own. This situation is philosophically interesting in two immediately apparent ways: firstly, because of the questions which it raises concerning the ways in which a present or future obligation might be argued to exist in relation to a promise given in the past; secondly, because it is possible to imagine a society in which the concept of keeping promises does not exist, so that the notion of individuals ever placing the interests of others before their own would simply not arise.... ... middle of paper ... ..."
The thoughts expressed in this article can be related to a lot of events throughout history. The thesis of this article is that Western culture in itself is a unique and diverse culture, but it is not, nor will it ever be, the culture of the rest of the world. Two theories are introduced, the Coca-colonization theory and the modernization theory. However, the Coca-colonization theory is disreputated as the true meaning of culture revolves around religion, language, societal customs, and moral values.
In addition, I argue that poor economic and social conditions in Muslim countries are caused by improper government policies and deep social c...
That being said, I hope that this research will open new horizons of thought for the fellow readers and bring about the hidden aspects. Not only this, but this research will also provide ample arguments to fellow readers that shall help them in any debate whatsoever on the topic and will ensure that no one who has read this article is not able to answer an argument that questions Islamic credibility and its stance over the ever changing world that has now turned into a global village.
The Story of Christianity is a very informative summation; a continuation of Volume 1 which covered the beginning of the church up to the Protestant Reformation, while Vol. 2 dealt with the Protestant Reformation up to more modern time period. This author delivers a more comprehensive and deeper look into the development of Christianity, which includes particular events which had transpired throughout the world; particularly how Christianity has expanded into Central and South America. Gonzalez opens up this book with the “Call for Reformation,” where he shares with his readers the need for reform; the papacy had started to decline and was corrupt, in addition to the Great Schism, which had further weakened the papacy (p.8). The author explains how the church was not the only issue but that the church’s teachings were off track as well, seeing that the people had deviated from...
Islamic finance is a financial system that operates according to Islamic law (which is called sharia) and is, therefore, sharia-compliant. Just like conventional financial systems, Islamic finance features banks, capital markets, fund managers, investment firms, and insurance companies. However, these entities are governed both by Islamic law and the finance industry rules and regulations that apply to their conventional counterparts. Therefore, islamic finance is to be assets based as oppose to the currency based whereby investment structured on exchange or ownership of assets, and money is simply mechanism for transaction process. It would based on two sources which are Al-Quran and As-Sunnah.
Religious Fundamentalism is not a modern phenomenon, although, it has received a rise in the late twentieth century. It occurs differently in different parts of the world but arises in societies that are deeply troubled or going through a crisis (Heywood, 2012, p. 282). The rise in Religious Fundamentalism can be linked to the secularization thesis, which implies that victory of reason over religion follows modernization. Also, the moral protest of faiths such as Islam and Christianity can be linked to the rise of Religious Fundamentalism, as they protest the influence of corruption and pretence that infiltrate their beliefs from the spread of secularization (Heywood, 2012, p. 283). Religious Fundamentalists have followed a traditional political thought process, yet, have embraced a militant style of activity which often can turn violent (Heywood, 2012, p. 291).
The reason for the secuarlisation can be seen in the fact that sociology is a theory both guided by and aims to build theories (Wuthnow/Dillon 2003:21). Theories require analysis and generalisation. It is impossible to analyse a subject without first defining the subject (Robertson 1970:34). Definition is a contentious issue because different definitions entail different criteria which lead to different patterns being indentified in data. Theories are created by the identification of patterns in data which are then generalised.(Davies 2007:5). Thus a definition will vastly affect the content and concept of a theory. Definitions of religion in sociology fall into two categories, functional and substantive. This essay will assess...
First of all, let us outline how Islamic banks actually work and what their main differences are in comparison with conventional banks. In this banking system, banks are operated by Islamic laws (known as Sharia), so Islamic economic principles are considered as primary guidance. Two basic doctrines behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest . Hence unlike conventional commercial banks, Islamic banks do not pay or charge interest on lending or borrowing of money. This is because the Sharia’s strictly prohibits, among other things, the receipt and payment of riba (interest) /. The interpretations to clarify the meaning behind this restriction suggests that earning or charging extra amount of money from debtor has to be seen something as immoral behavior, because making pressure on your borrower is actually unfair from the view point of Islam. To make it clear, the religion of Islam basically promote the principle of justic...
...ation, for the whole idea is a myth and cannot be introduced in a country where normal banking exists, and which claims to be secular. To create a legislation which allows no interest to be paid or received would mean subjecting ordinary savers to enormous risks - which surely cannot be the intention of Islamic banking. If Islamic banks cannot invest in bonds, T-bills, and commercial paper, or lend to finance inventory or projects for interest, it defeats the whole purpose of banking. Even in Muslim countries, what is called Islamic banking is - to put it in the dismissive words of one western critic - "normal banking sprinkled with holy water." At best, Islamic banking is a way to deny the existence of interest and make it easier for Muslims to accept the idea of banking since the Qur’an includes strong injunctions against the giving or taking of "riba" - interest.
Next, Islamic banking also are misinterpret as not profitable as it forbidden riba’ in its practices. Also, we need to aware the customers that Islamic banking not just an alternative for finacial approach, but it also provides better value to the customers.