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Islamic Banking System is the

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Most Popular Concept in

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Prepared by:
Muntasirul Haque Naeem
ID# 082 281 030 Section: 12

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What is Bank
Aninstitutionforreceiving,lending,e xchanging,and safeguarding money and, in Some cases, issuing notes and transacting other financial business. The office or quarters of such an institution.

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Islamic Banking
Islamic Banking is a banking system based on Islamic shariah, which strict to morality and ethics and operated through an interest free system. In many important respects, it can be seen as the perfect alternative and best solution and thats why may be preferable than conventional banking system.

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Background
Involves a social implication which is necessarily connected with the Islamic order itself & represents a special characteristic that distinguishes Islamic banks from other banks based on other philosophies. In exercising all its banking or development activities, the Islamic bank takes into prime consideration the social implications that may be brought about any decision or action taken by the bank. Profitability despite its importance and priority is not therefore the sole criterion or the prime element in evaluating the performance of Islamic banks.

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Areas of Research
What are the characteristics of Islamic banking? What are the different types of savings accounts in Islamic bank and how they are different from conventional bank? What is Islamic Banking? What are the different types of loan systems in Islamic bank and how they are different from conventional bank? What are some unethical approaches of conventional

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Hypothesis
Conventional banking approaches are highly destructive to society and very important issues and Islamic Banking is preferable for the betterment of the society.

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Methodology
Primary data:
Sample size: 30 Banks clients Age Group : 20-55 Years Profession : Various

Secondary data:
Different sources like books, articles, journals and various web sites the library and the web standard reference sources, documents etc were used. For finding material on the web, the standard research engines such as Google, Yahoo, Bing as well as large reference sites and news sites were used as well.

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Primary Data analysis

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What kind of banking system you prefer for opening an account?

Public's preferrence to Open a Bank Account

Why do you choose the banking system?

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What factor drives you to choose Islamic banking system?

What kind of people prefers Islamic banking system?

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What is the demand of Islamic banking system to the young generations?

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Do you think Islamic banking system is the perfect banking system?

Do you believe the system ensures the proper distribution of resources?

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Do you thing that Islamic banking is fare for every one?

Islamic Banking is Fare for Everyone

Do you think Islamic banking system provides less profit than general banking system to their clients?

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Do you think, every bank should have separate branch for applying Islamic banking system?

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What is/are the disadvantage/s of Islamic banking system?

From your point of view & judging the number of clients, which bank practices Islamic rule perfectly in BD?

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Why Mudaraba is very popular?

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Secondary Data Analysis

Characteristics of Islamic Banking

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The basic characteristics of Islamic Banking are: It does not invest in illegal (Haram) business It does not provide loan rather it provides investment capital It give the first priority to the depositors to return money back at the time of liquidation It considers probable earnings of investment receiver before charging an installment payment Its operation is based on Islamic Shariah which is based on morality, ethics and integrity. Generates income as profit Practices risk sharing principles Profit is not guaranteed. (Rahman, Personal communication, 2010)

Characteristics of Islamic Banking

Analysis: After observing the description and characteristics it can be easily said all the financial transactions under Islamic banking are highly socio friendly and helpful for the prosperity and betterment of the society.

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4/12/12 Types of Savings accounts in Islamic Banks and there difference from CB

Two basic types of savings accounts are: Al Wadiaand Mudaraba or Investment Account The Mudaraba account or Fixed Account

Types of loan (capital providing) system in Islamic Banks and their difference with Conventional Banks There are three basic types of loan providing system in Islamic bankingMudaraba Murabaha & Musharaka

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Unethical Approaches of Conventional Banks

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Some most important unethical approaches are: Giving loan to illegal and socially destructive business (Alcohol, cigarette, bar, casino etc) Contributing to the high price of commodities Contributing to restrict money only among very few rich people of the society Contributing to create inactive workforce and idle money Not giving the priority to the depositor at the time of liquidation Not providing any assistance to the loan receiver after lending money Not sharing any risks of business Not engaging in charity mandatorily

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Summary of findings:
The results of both interview and one to one surveys show that: Most of the people assume that the clients are only dealing with Islamic Banks only because of their religious perspective and there is actually no difference between Islamic and Conventional banking system. Islamic Banking is actually different than conventional banking on the basis of objectives, Riba and risk sharing practices, generating income as profit that is variable, obtaining trading principle and in many ways. The magnitude of difference of the operations and policies of Islamic Banks as Compare to Conventional banks is huge.

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Summary of findings:
Conventional Banks are causing serious harm to the society through conventional banking process in an implicit way. What they are doing is perceived as very important issues. Islamic banking is preferable and is the solution to this problem in this regard because of its strictness to morality and ethics to consider social issues during its operation.

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Limitations

A bit complicated topic Only from social perspective Only 30 respondents Respondents were only bank users A very high percent of the respondents went for I dont type options

No statistical data No statistical software

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Conclusion
The existence of Islamic and conventional banks created stiff competition among banks to attract and retain greater number of customers by gaining dominance over one another in different aspects. However, considering the social aspect, Islamic Banking is preferable than conventional banking for the betterment of the society. This research backed its claim mainly based on emotional and motivational support points. Hence, future research efforts may expand the empirical study by providing actual figures on investments, sales or financing relating to social responsibility initiatives, expenses incurred on environmental practices, total number of donations given, community services, scholarships, and other relevant data in addition to the survey results of respondents attitudes. This data would enable the researcher to employ more rigorous analysis in providing a more comprehensive picture of socially responsible practices and their impact on the banks overall performance.

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Recommendation

Firstly, based on the survey findings, it is highly recommended that Islamic financial institutions should play a vital role in addressing socio-economic issuesand improvements in important aspects of human welfare which is not taken into consideration by Conventional banks. Secondly, by effective marketing campaigns and efficiently channeling financial resources Islamic banks should enhance awareness and massively communicate their social activity and their core differences with Conventional banks. Thirdly, in doing all of these Islamic banks must ensure that all of their activities are Shariah compliant not only on their forms and legal technicalities but in the form of practical implications so that people may not say against their authenticity.

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Recommendation
Fourthly, Unethical and hazardous approaches of interest based banking should be disclosed and very well communicated to all. Lastly, People should be more conscious and aware about their banks operations, functions, and become more ethically concern to stop dealing with them and go for the available alternatives.

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