In Islam, Muslims are expected to follow a certain set of laws and rules that have been established over the years. These laws, have been set with the guidance of the Quran and practices that have taken place over the years. And so it is no wonder that these laws are even applicable when it comes to the banking aspect as well. Here are some significant differences you could see between the traditional banking and the Islamic one.
Real assets are the products
In conventional banking money is not only considered as a common medium of exchange and a store of value but it is also considered as a product as well. However, when it comes to islamic banking the product is the asset and not money. Money is simply considered as a medium of exchange and nothing more.
Investment is halal
Most conventional banks that are profit motivated seek to invest the gained money on the most profitable projects. This could be on a new casino, a club and whatnot. However, when it comes to Islam, such investments are considered to be Haram and prohibited. And so when these banks make investments, they make sure that the right investment means are considered and not just those that are the most profitable. Visit this link https://www.hejazfs.com.au/cash-investments/ for more info on halal investment.
Losses are shared
In traditional banks interest is charged even though the company might be suffering from losses. This also applies to the interest that is deposited in to the accounts of the customers. However, when it comes to the Islamic kind, if there are losses, then they are shared equally just as how profit would be shared upon. And so if during the considering period there is a loss, then this would be taken off from the customer too!
Since the banking here is done in terms of real assets and goods and services, there is a balanced budget that is resulted at the end of the day. This makes even obtaining islamic loans from such banks much more beneficial than from traditional banks. However, with regards to the traditional banks, there is usually a deficit in the budget because of inflation and no real expansion backed by assets, that has taken place. In addition to the above since this kind of banking uses, goods and services or real assets to deal with, there is no inflation that is created as well. However, it is a huge issue that the traditional banks are facing as a result of fake expansions created through money and not assets!