Difference Between Islamic Banking And Islamic Banking

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Recommended: Concept of islamic finance

1.1 Introduction Islamic banking can be defined as the prohibition of riba’ or interest in the banking transaction. It pays the investor profit-sharing dividends and offers borrowers fixed repayment rates. Conventional interest rate are deemed not “halal” or legitimate by Islamic law (kamus perwira: 1998:451) Prohibition of Riba’ was stated by Allah SWT in Holy Quran in Surah Al-Baqarah verse 275 “Allah has permitted trade and prohibit riba”. Owing to the highly competitive environment, it is important to Islamic bank to study the customer perception to increase the market of product and services of Islamic banking in Malaysia effectively (Dusuki and Abdullah, 2006, Thambiah, Nathan and Eze, 2008). This study is to investigate the perception …show more content…

The different between Islamic Banking and Conventional banking are Islamic Banking transaction is complies with Syariah Law but conventional banking does not restricted with any Syariah Law. Islamic Banking prohibit interest in their transaction but they offer the concept of profit sharing. The first Islamic Banking transaction is the principle of profit-sharing which is Islamic Bank promote to muslim to become a partner with Islamic Bank and gain a profit based on their profit-sharing ratio between both partner. Islamic Bank offer a few product of Islamic Bank which the concept is profit-sharing such as Mudharabah, Musyarakah and others. Second principle of Islamic Bank is prohibition of Riba. Allah SWT was stated in Surah Al-Baqarah verse 275 which is “those who devour riba will not stand except as one whom the devil hath draven madness by [his] touch”. Its means Allah SWT strictly prohibit Riba’ and its consider as haram (non-permisible). Besides that, Islamic Banking should operate Syariah-approve activites which is one of the principle of Islamic Bank. Syariah-approve activities can be define as all the transactions or activities made by Islamic Bank should be permissible and non-contain any prohibit element such as pork, alcohols and gambling and for investment, Islamic Bank can only invest with company which not contain any prohibit element. (Khir et al.

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