Introduction The banks play an important role in the society andwe can never imagine ourselves without banks. Now it has become a blood vein ofany economy .all of the financial and business transactions being held underthe banks. As we know that there are some advantages as well as disadvantagesof banks.
The banks play an important role in the society and we can neverimagine ourselves without banks. Now it has become a blood vein of any economy.all of the financial and business transactions being held under the banks.
Aswe know that there are some advantages as well as disadvantages of banks.Islamic banks are rapidly getting market share in country economy. People needbenefit from banks about borrowers and depositor’s .The first establishment ofconventional banks was with no interest but after some time they added someinterest and gradually it become of the main source of earning of the banking system.Islamic banking started to play a vital role in the economy in 1970 .The maindifference between Islamic banking and conventional banking is that interestrate is prohibited in Islam. Where’s an Islamic banks belief in profit and losssharing. The banking principles and the rules and regulations equity structureare different as well.
Islamic Banks arerapidly getting market share in country economy. People need benefitfrom banks about borrowers and depositor’s .the first establishment ofconventional banks was with no interest but after some time they added someinterest and gradually it become of the main source of earning of the banking system.Islamic banking started to play a vital role in the economy in 1970 .The maindifference between Islamic banking and conventional banking is that interestrate is prohibited in Islam. Where are Islamic banks beliefs in profit and losssharing. The banking principles and the rules and regulations Right now global financial crisis are going to beincreases due to a non proper functioning of conventional means western bankingsystem and due to increased in debts the attention of the people are convertinginto Islamic banking system.
Academics and the policy maker like point to theadvantage of shariah complaint financial products. More importantly the shariahcomplaint products are attractive .This paper describe Islamic banking productsthe literature the structure and financial intermediation. This paper alsodefined the business model of Islamic banks are more stable and efficient ascompare to conventional banks.
This paper analyze the performance of the bothbank groups during the crisis .Islamic banks doesn’t allow anyone to charge theinterest only price of goods are services and the other hand beliefs the equaldistribution of profit and loss sharing .Islamic banks are more cost efficientas compare to conventional banks in a large countries. However in a currentstructure the flaws on both bank groups exist.Islamic banks are more suitable where the people ofthe middle family want to establish their business without giving interest.Islamic banks are suitable for lower and middle class to establish their business.There is a difference of the business model of the both banks like differencein products, methodology, efficiency and stability.
The one important featureof the Islamic banking is that there is a equal risk for the depositors and theBrower because there is equal distribution of profit and loss.Another feature of the Islamic bank is mudarbahcontract the bank will provide the resources like loan while customer will puton resources and efforts to run the business. Profit will be share on thepredetermined rules. If the business goes on loss the both banks and customersbare the loss.Another feature is musharkah contract as the bank isone of the several investors where profit and loss will be shared among allinvestor.Another feature is murabah contract which resemblesthe conventional banking in this sort of contract the bank will purchase theproduct or goods on behalf of the client and then sell it to client where bankkeeps the ownership of the goods and lease it to the client. LiteraturereviewTheoreticalevidenceLot of people has done a lot of work on comparativeanalysis on conventional and Islamic banks.
There study was based on thecomparison of the both banks and their relationship between competition andstability in the banking system .This argue was made by Carletti (2008) and Berger,flapper and Turk arises in (2009)In 1990 keeley debate on competition fragilityrelation that large number of US bank resulted by the deregulation in thebanking industry .The camel approach is very important to determine theprofitability of the conventional and Islamic banks.Recent Paper work shows different characteristics,structures and macroeconomic variables of the banks across country .
thosepeople are done by Bashir (2000),Abdus Samad and M.Kabir Hassan (1997),RimaTurk Ariss(2006),Faisal (2004),Hassan and Bashir (2004),Serish(2009),Toufiq(2005),Chukwuogor (2002),Anouar Hassoune (2002),M.S. Moon(2007),Devid tripe(2002) Kosmidou(2004) and Spathis(2002). Bashir (2000), his research was about ondeterminants of profitability in Islamic banks.
Bashir and Hassan (2004) have research aboutconducting regression analysis. Rima Turk Ariss (2006) analysis on competitivecondition prevailing in Islamic and conventional global banking markets bylooking into difference of profitability measure between Islamic banks andconventional banks.M.S Moin (2007) was measured the performance offirst Islamic bank in Pakistan with comparison of 5 conventional banks.Kosmidou (2004) measured performance and efficiencyof conventional banks in Greece and Europe in 2003_2004.Devid Tripe (2002) studied about relationshipbetween capital level and return on equity of banks in New Zealand andAustralia in 1996_2002.