London School of International Business (LSIB)

How does Islamic finance differ from conventional finance in the Level 5 Certificate in The Concepts of Islamic Finance and Banking part time?

Islamic finance and conventional finance are two distinct systems that operate on different principles and values. In the Level 5 Certificate in The Concepts of Islamic Finance and Banking part time, students learn about the key differences between these two systems and how Islamic finance offers a unique approach to banking and investment.

One of the main differences between Islamic finance and conventional finance is the prohibition of interest in Islamic finance. In Islamic finance, earning money from interest is considered unethical and against Islamic principles. Instead, Islamic finance operates on the principle of profit-sharing, where profits and losses are shared between the lender and the borrower.

Another key difference is the concept of risk-sharing in Islamic finance. In conventional finance, the lender bears all the risk while the borrower is guaranteed a fixed return. However, in Islamic finance, both parties share the risks and rewards of the investment, promoting a more equitable and fair system.

Furthermore, Islamic finance is based on ethical and moral principles, with investments being made in sectors that are considered halal (permissible) according to Islamic law. This means that investments in industries such as alcohol, gambling, and pork are prohibited in Islamic finance, promoting socially responsible investing.

Additionally, Islamic finance promotes financial inclusion and social welfare, with a focus on helping those in need and promoting economic development in the community. This is in contrast to conventional finance, which may prioritize profits over social responsibility.

Overall, the Level 5 Certificate in The Concepts of Islamic Finance and Banking part time provides students with a comprehensive understanding of how Islamic finance differs from conventional finance. By learning about the principles and values that underpin Islamic finance, students are equipped with the knowledge and skills to navigate the growing field of Islamic banking and finance.

Islamic Finance	Conventional Finance
Prohibition of interest	Relies on interest-based transactions
Profit-sharing	Fixed returns for lenders
Risk-sharing	Lender bears all the risk
Ethical investing	May invest in unethical industries
Promotes social welfare	May prioritize profits over social responsibility