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What Is The Furure Of Banking Industry? Different Approach: Islamic Vs. Conventional System

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  • Narcisa Roxana Mosteanu

    (American University in the Emirates, Dubai, UAE)

Abstract

This paper comes to present the distinguish approaches between Islamic banking system and Conventional banking system. The author aims to find out which system can sustain a healthy economy, resist to financial turbulences, and help individual and businesses to develop themselves and the entire society. And yes, through this paper, the study found out why Islamic banking system is more sustainable, secure and pass successful the financial crisis from 2008. Furth more, the research paper concludes that for an economic sustainable development these two-banking systems can come together, learn from each other. Conventional banks can offer Islamic banks products, even more can open Islamic bank breach. During the research paper, the finds are very interesting, and presented a different way of approaching trade, financial transactions, risk, profit and economic development. The Islamic banking system is much closer to citizens, based on profit-loss-and risk sharing, real assets backed, coming from the principles of life preached by Islamic religion. The Conventional banking system is based on financial and banking laws strictly on economic flows, based on debtor-creditor and profit principles, leaving the whole risk on the customer side and not all the time financial transactions are real assets backed. Research has discovered and comes to present and sustain that, in the last decade, Islamic banks' efficiency was better than Conventional banks, especially during a crisis period. This efficiency of Islamic banks comes from their unique and special principles of life, which is risk-averse and anti-speculation, compared to Conventional one, which are profit oriented. These Islamic principles of life drove and lead to the capacity of resisting to the financial turbulences. Islamic banking system has more helpful, and realistic approach.This paper comes to present the distinguish approaches between Islamic banking system and Conventional banking system. The author aims to find out which system can sustain a healthy economy, resist to financial turbulences, and help individual and businesses to develop themselves and the entire society. And yes, through this paper, the study found out why Islamic banking system is more sustainable, secure and pass successful the financial crisis from 2008. Furth more, the research paper concludes that for an economic sustainable development these two-banking systems can come together, learn from each other. Conventional banks can offer Islamic banks products, even more can open Islamic bank breach. During the research paper, the finds are very interesting, and presented a different way of approaching trade, financial transactions, risk, profit and economic development. The Islamic banking system is much closer to citizens, based on profit-loss-and risk sharing, real assets backed, coming from the principles of life preached by Islamic religion. The Conventional banking system is based on financial and banking laws strictly on economic flows, based on debtor-creditor and profit principles, leaving the whole risk on the customer side and not all the time financial transactions are real assets backed. Research has discovered and comes to present and sustain that, in the last decade, Islamic banks' efficiency was better than Conventional banks, especially during a crisis period. This efficiency of Islamic banks comes from their unique and special principles of life, which is risk-averse and anti-speculation, compared to Conventional one, which are profit oriented. These Islamic principles of life drove and lead to the capacity of resisting to the financial turbulences. Islamic banking system has more helpful, and realistic approach.

Suggested Citation

  • Narcisa Roxana Mosteanu, 2017. "What Is The Furure Of Banking Industry? Different Approach: Islamic Vs. Conventional System," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 6(3), pages 1-36, august.
    • Handle: RePEc:scm:ecofrm:v:6:y:2017:i:3:p:36
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    References listed on IDEAS

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    1. Mr. Alfred Kammer & Mr. Mohamed Norat & Mr. Marco A. Piñón-Farah & Mr. Ananthakrishnan Prasad & Mr. Christopher M Towe & Mr. Zeine Zeidane, 2015. "Islamic Finance: Opportunities, Challenges, and Policy Options," IMF Staff Discussion Notes 2015/005, International Monetary Fund.
    2. Alfred Kammer & Mohamed Norat & Marco Pinon & Ananthakrishnan Prasad & Christopher M Towe & Zeine Zeidane, 2015. "Islamic Finance; Opportunities, Challenges, and Policy Options," IMF Staff Discussion Notes 15/5, International Monetary Fund.
    3. Mohammad Umer Chapra, 2009. "The Global Financial Crisis: Can Islamic Finance Help? الأزمة المالية العالمية: هل يساعد التمويل الإسلامي؟," Chapters of books published by the Islamic Economics Institute, KAAU or its faculty members., in: Islamic Economics Institute (ed.),Issues in the International Financial Crisis from an Islamic Perspective-05 قضايا في الأزمة المالية العالمية من منظور إسلامي, edition 1, chapter 2, pages 11-18, King Abdulaziz University, Islamic Economics Institute..
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