Difference Between Islamic Finance And Conventional Finance

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When it comes to differentiate between conventional finance and Islamic finance it is noticeable that there is different treatment of risk is associated also the sharing of the risk.

After the examination of some steps we will be able to understand risk and risk management in financial markets and conventional banking.

Bank finance and issuance of Islamic securities (sukuk) are two main forms of Islamic finance. When we talk about the conventional banking it is called debt.  Loans are given and bonds are issued in conventional banking and these are not accurate due to non-sharing of risk. There is no place for bank loans and bonds in Islamic finance. There is restriction of taking and giving interest in Islamic finance as it is advised in Holy Book “The Quran” and Muslims have to follow all the paths and instructions given in their religious book. When any company is financed by debt and it has obligation of interest payment so it means that risk is not shared fairly.

As compared to Islamic finance there is requirement to provide finance on the rule of loss and profit sharing. To find out about different types of contract you need to read the shariah law. Each type of contract has its own sharing of profit and loss between enterprise and the financer. From the point view of Holy religion “Islam” money can’t buy or sale and where there is involvement of interest it is considered as sale/purchase of money. Sale/purchase of money is strictly prohibited in the religion “Islam” and person who is doing so there is instruction of war against the one and only true God (Allah) and his Holy Prophet.

Motive of the Islamic principle is not to make any cruel on poor(s) when there is need of borrowing in hard time and near future it will be returned by borrower. Interested is the burden over the poor peoples and poor are not able to bear the burden of the interest even it is hard to fulfill their basic needs.

When, we talk for professional peoples who are engaged in any kind of business and facing shortage of money so they require finance for their business operation running but conventional financing is charging interest at fixed rate when amount is borrowed and it is prohibited in Islamic finance.

Yes! You can borrow the finance for your business but it will be on condition of profit and loss sharing so it is allowed in Islamic finance and financer has a chance of loss as well.

At Hejaz Financial Services we are fully complied Shariah and Islamic super Australia rules and regulation. For the Muslims of Australia Hejaz Financial Services is the best point for the investment or loan.


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