When it comes to risk management, Islamic finance has some key differences compared to conventional finance. In the Ofqual Level 5 Certificate in The Concepts of Islamic Finance and Banking course, students will learn about these distinctions and how they impact the industry.
| Islamic Finance | Conventional Finance |
|---|---|
| Risk-sharing is a fundamental principle in Islamic finance, where profits and losses are shared between parties. | In conventional finance, risk is often transferred to third parties through insurance or hedging. |
| Islamic finance prohibits investments in industries such as gambling, alcohol, and pork, which are considered haram (forbidden). | Conventional finance does not have such restrictions on investments, allowing for a wider range of investment opportunities. |
| Islamic finance emphasizes ethical and socially responsible investing, promoting economic development and social welfare. | Conventional finance may prioritize maximizing profits, sometimes at the expense of social or environmental concerns. |
By understanding these differences in risk management between Islamic finance and conventional finance, students in the Ofqual Level 5 Certificate in The Concepts of Islamic Finance and Banking course will be equipped to navigate the complexities of the industry and make informed decisions that align with Islamic principles.