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    Diff Between Normal & Islamic Banking in Maldeev

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    Afroza Khan
    Under conventional mortgage financing, a customer borrows money from a bank to purchase a property and repays the loan plus interest over time. However, Islamic mortgage financing prohibits interest. Instead, the bank and customer jointly purchase the property as co-owners in proportion to their investment. The customer then gradually purchases the bank's share of the property and pays rent to use the bank's portion until full ownership is attained. Additionally, rent under Islamic financing only begins once the property is delivered and usable, unlike conventional financing where rent starts from initial payment date.

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    Diff Between Normal & Islamic Banking in Maldeev

    Uploaded by

    Afroza Khan
    385 views2 pages
    Under conventional mortgage financing, a customer borrows money from a bank to purchase a property and repays the loan plus interest over time. However, Islamic mortgage financing prohibits interest. Instead, the bank and customer jointly purchase the property as co-owners in proportion to their investment. The customer then gradually purchases the bank's share of the property and pays rent to use the bank's portion until full ownership is attained. Additionally, rent under Islamic financing only begins once the property is delivered and usable, unlike conventional financing where rent starts from initial payment date.

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    Diff Between Normal & Islamic Banking in Maldeev

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    Under conventional mortgage financing, a customer borrows money from a bank to purchase a property and repays the loan plus interest over time. However, Islamic mortgage financing prohibits interest. Instead, the bank and customer jointly purchase the property as co-owners in proportion to their investment. The customer then gradually purchases the bank's share of the property and pays rent to use the bank's portion until full ownership is attained. Additionally, rent under Islamic financing only begins once the property is delivered and usable, unlike conventional financing where rent starts from initial payment date.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    385 views2 pages

    Diff Between Normal & Islamic Banking in Maldeev

    Uploaded by

    Afroza Khan
    Under conventional mortgage financing, a customer borrows money from a bank to purchase a property and repays the loan plus interest over time. However, Islamic mortgage financing prohibits interest. Instead, the bank and customer jointly purchase the property as co-owners in proportion to their investment. The customer then gradually purchases the bank's share of the property and pays rent to use the bank's portion until full ownership is attained. Additionally, rent under Islamic financing only begins once the property is delivered and usable, unlike conventional financing where rent starts from initial payment date.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Diff between normal & Islamic banking in maldeev

    Difference between Conventional and Islamic


    banking
    Conventional Banking

    Islamic Banking

    Money is a commodity besides medium of


    exchange and store of value. Therefore, it can
    be sold at a price higher than its face value and
    it can also be rented out.

    Money is not a commodity though it is used as


    a medium of exchange and store of value.
    Therefore, it cannot be sold at a price higher
    than its face value or rented out.

    Time value is the basis for charging interest on Profit on trade of goods or charging on
    capital.
    providing service is the basis for earning profit.

    Islamic bank operates on the basis of profit and


    Interest is charged even in case the organization
    loss sharing. In case, the businessman has
    suffers losses by using banks funds.
    suffered losses, the bank will share these losses
    Therefore, it is not based on profit and loss
    based on the mode of finance used (Mudarabah,
    sharing.
    Musharakah).

    The execution of agreements for the exchange


    While disbursing cash finance, running finance
    of goods & services is a must, while disbursing
    or working capital finance, no agreement for
    funds under Murabaha, Salam & Istisna
    exchange of goods & services is made.
    contracts.

    Islamic banking tends to create link with the


    real sectors of the economic system by using
    Conventional banks use money as a commodity trade related activities. Since, the money is
    which leads to inflation.
    linked with the real assets therefore it
    contributes directly in the economic
    development.

    What is difference between conventional mortgage financing and Islamic


    Mortgage financing?
    Under conventional mortgage, in order to purchase a property the customer borrows money and
    repays it with an additional amount over a period of time. The additional amount is the amount
    of interest which is against the Shariah rulings of Islam. Under Islamic mortgage finance facility,
    Islamic bank shares with the customer in purchasing his desired property. Accordingly, the
    customer and the bank become the joint owners of the property in proportion to their share in
    purchasing the property. In order to own and use the entire property, the customer purchases the
    share of banks property over a period of time and also pays the rent for using the banks
    share of the property. Over a period of time, the customer manages to purchase the entire share
    of bank in the property. Ultimately, the customer becomes the sole owner. Further, in case of
    Islamic mortgage finance, the rent will be charged after the lessee has taken delivery of the
    property and it is in workable/usable condition. Rent cannot be charged from the day the price
    was paid to acquire the property/asset. If the supplier has delayed the delivery after receiving the
    full price, the lessee should not be liable for the rent of the period of delay. In case of
    conventional mortgage finance, normally the lease rentals starts from the date the bank make
    payment for purchasing the property/asset.

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