Islamic banking and conventional banking are two distinct financial systems with different principles and practices. In the context of the Ofqual Level 5 Certificate in The Concepts of Islamic Finance and Banking course, it is essential to understand the key differences between the two.
| Islamic Banking | Conventional Banking |
|---|---|
| Based on Shariah principles, which prohibit the payment or acceptance of interest (riba). | Interest-based system where interest is charged and paid on loans and deposits. |
| Focuses on profit-sharing and risk-sharing arrangements, promoting fairness and ethical conduct. | Primarily focused on lending money for profit, with limited risk-sharing between the bank and customers. |
| Assets and investments must comply with Islamic principles, such as avoiding investments in alcohol, gambling, and other prohibited activities. | Investments are made based on financial returns, without specific restrictions on the nature of investments. |
Overall, Islamic banking operates on ethical and moral principles, promoting financial inclusion and social justice. Understanding these differences is crucial for students pursuing the Ofqual Level 5 Certificate in The Concepts of Islamic Finance and Banking course, as it provides a comprehensive overview of the principles and practices of Islamic finance.