London School of International Business (LSIB)

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

Islamic finance and conventional finance are two distinct systems that operate on different principles and values. In the Nvq Level 5 Certificate in The Concepts of Islamic Finance and Banking course, students learn about the key differences between these two systems and how they impact the financial industry.

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 protected. However, in Islamic finance, both parties share the risk and reward of the investment. This promotes a more equitable and fair system of finance.

Furthermore, Islamic finance is based on ethical and moral principles, such as avoiding investments in industries that are considered harmful or unethical in Islam, such as alcohol, gambling, and tobacco. This ensures that investments are made in a socially responsible manner.

Additionally, Islamic finance promotes financial inclusion and social welfare by encouraging the distribution of wealth among all members of society. This is achieved through the concept of Zakat, which is a form of almsgiving that is mandatory for all Muslims who have the means to do so. Zakat helps to redistribute wealth and alleviate poverty in society.

Overall, the Nvq Level 5 Certificate in The Concepts of Islamic Finance and Banking course provides students with a comprehensive understanding of the differences between Islamic finance and conventional finance. By studying these differences, students are equipped with the knowledge and skills to navigate the complexities of the financial industry while upholding Islamic principles and values.

Islamic Finance	Conventional Finance
Prohibition of interest	Interest-based system
Profit-sharing	Lender-borrower relationship
Risk-sharing	Lender bears all risk
Ethical and moral principles	Profit-driven
Financial inclusion and social welfare	Focus on profits