Islamic finance and conventional finance are two distinct systems that operate on different principles and guidelines. In the context of the Ofqual Level 5 Certificate course, it is important to understand the key differences between the two.
| Islamic Finance | Conventional Finance |
|---|---|
| Based on Shariah principles, which prohibit interest (riba) and unethical investments. | Interest-based system where lenders receive interest on loans. |
| Focuses on risk-sharing and asset-backed transactions to promote financial inclusion. | Primarily based on debt contracts and interest-bearing transactions. |
| Emphasizes ethical and socially responsible investing, avoiding industries such as gambling and alcohol. | Investments are made based on financial returns, regardless of ethical considerations. |
Overall, Islamic finance and conventional finance differ in their underlying principles, practices, and ethical considerations. Understanding these distinctions is crucial for individuals pursuing the Ofqual Level 5 Certificate course, as it provides a comprehensive overview of the diverse financial systems in the global market.