Islamic finance and conventional finance are two distinct systems that operate on different principles and guidelines. Here is a comparison of the key differences between the two:
| Islamic Finance | Conventional Finance |
|---|---|
| Based on Shariah principles that prohibit interest (riba) and unethical investments | Interest-based system where interest is charged on loans and investments |
| Focuses on risk-sharing and profit-sharing partnerships | Primarily based on debt financing and interest-bearing transactions |
| Assets and investments must comply with Islamic law and ethical standards | No specific religious or ethical guidelines for investments |
| Encourages social responsibility and economic development | Focuses on maximizing profits for shareholders |
These differences make Islamic finance a unique and ethical alternative to conventional finance, offering a more inclusive and sustainable approach to financial transactions.