The difference between Islamic and conventional Banks Research Paper

The difference between Islamic and conventional Banks - Research Paper Example Financial scholars have surpassed lasting ambiguous loan contracts practiced by drawing attention of the financial world to the benefits presented by bank products that meet the requirements of Sharia. Most of these products conform to religious backgrounds of the local people; and hence turn out to be attractive to wide fragments of the population in need of financial services they can identify with their cultural beliefs and way of life. Despite these existing trends, little academic evidence and research on the functioning of Islamic banks is recorded. Since its establishment in 1970, Islamic banking has witnessed a significant growth. With the establishment of its operational foundations a few decades ago, the banking model acted as a major vehicle that offer products similar to convenient banks. Numerous academic research and literature have gone further to establish the viability of these types of banks in dealing with finances. It is also evident that the last few decades the banking model has been characterized by an increase in its financial institutions that are spread in all continents. Most importantly financial institutions, in Europe and Asia, operate on Islamic windows and thus provide a convenient banking framework to their clients. Therefore, this paper describes some of the common differences between Islamic and conventional banks (Ali, 2005). Despite the fact that there is growing interest on Islamic banking and Islamic finance literature, a few academic papers about the subjects exist. A policy research working paper by Beck, Demirgà ¼Ãƒ §-Kunt & Merrouche (2010), confirms that there is a deficiency of academic work highlighting Islam finance trends. This trend contrasts with the increased importance played by Islamic banking in a majority of Muslim countries across Asia and Africa. Based on the details presented, this paper will, hopefully, contribute to the rising literature