ISLAMIC BANKING

A Leveled Comparative Analysis Between Western (Conventional) and Islamic Banking

A leveled comparative analysis between western (conventional) and Islamic banking

Introduction

Since the first institution was positioned in 1963, Islamic banks have profited a footing in nearly every Muslim most nation and in a couple of non-Muslim countries. Not simply do Islamic banks supply profit-sharing (instead of fixed interest payments) banking amenities, they are furthermore looked ahead to to attempt enterprise and deal undertakings on the cornerstone of equitable and applicable profits. In such banks, double-checking unbiased practices in dealings with customers and shareholders takes centerstage, more so than in conventional banking where much equitable accomplish wants to be enforced by extemal regulation.

While there is an plenty of publications on presentation requests, these investigations are confined to conventional banks. Similar investigations have not been undertook employing Islamic banks as samples. The target of this examine is to analyze the connection between interior variables and the presentation of Islamic banks in a kind analogous to such investigations carried out with conventional banks. This paper is split higher into five sections: the publications re-evaluate on intemal reasons for of bank presentation is emphasised in part two; part three interprets the serious presentation environs of an Islamic bank; part four views the methodology utilised in investigating the connection between the variables utilised in this examine and the presentation pointers of Islamic banks; part five extends on the findings; and part six makes a judgement this study. The phrases in italics in this paper are the Arabic phrases extensively employed in Islamic banking literature.

 

Literature Review

Among the investigators who have investigated the consequences of interior determinants on bank profitability are Hester and Zoellner (2006), Haslem (2005,2007), Fraser and Rose (2001), Fraser, Philips and Rose (2004), Heggested (2007), Mullineaux (2005), Kwast and Rose (2002), Smirlock (2005), Bourke (2007), Molyheux and Thornton (2002), and Stienherr and Huveneers (2004). Most of these investigations were undertook employing American data if not investigations carried out by Bourke (2007), Molyneux and Thornton (2002) and Stienherr and Huveneers (2004) in which worldwide data were used.

Hester and Zoellner (2006) investigated the connection between balance sheet pieces and the earning of 300 banks in Kansas City and Connecticut. They discovered that alterations in balance sheet pieces had a important consequence on a bank's earnings. While all asset pieces received optimistic effects, liability pieces for case demand, time and saving deposits poorly influenced profits. Haslem (2005) utilised 64 functioning ratios in alignment to assess the consequences of management, dimensions, placement and time on the profitability of commercial banks.

Islamic Economic Model

During the terminal couple of years, a substantial body of publications has emerged, mostly within the Islamic nations, on an alternate economic scheme to the Western economic system. In the evolving world there is expanding realization that the interest-based scheme of the capitalist West has went mistaken to explain the difficulty of scarcity and economic disparity. Various answers have been endeavoured to rendezvous the economic desires of man, but he has not yet been adept ...