The fundamental difference between Islamic and conventional banking is that conventional banks take deposits and advance funds on interest. In contrast, Islamic banks take deposits and advance funds on a profit and loss sharing basis. In addition, Islamic banks as ethical banking institutions do not deal with entities that are engaged in activities that are detrimental to the moral & socio-economic wellbeing of society.
Interest is prohibited in Islam fundamentally because money is not considered a commodity with an intrinsic economic value of its own; rather it is considered to be a unit of account, medium of exchange and a store of value. Charging interest on money is deemed unjust as the lender is guaranteed the capital plus interest without taking exposure to any commercial risk. However the borrower is required to pay back the money (capital + interest) irrespective of the outcome of the investment.
Islamic banks take investment deposits on an agency basis and invest same on behalf of the depositors on a profit and risk sharing basis. Islamic banks advance funds to individuals and the real sector of the economy using “cost plus” and equity modes of finance. The income earned by the bank on the asset side of the banking model is shared between the bank and the depositors on a pre-agreed profit sharing ratio. Therefore, the profit earned by both the bank and depositors is a function of the performance of the underlying investment assets.
Islamic banking is actually an asset based financial intermediary model that applies “cost plus” and equity modes of finance to advance funds to individuals and the real sector of the economy.
Example, an Islamic bank purchases the customer’s desired property in partnership with the client. Consequently, the customer and the bank become the joint owners of the property in proportion to their share of contributions upon purchase of the property. In order to own the entire property, the customer purchases the Bank’s share of the property over a period of time.
In contrast, conventional banks advance funds to borrowers on interest. Under conventional finance, in order to purchase a property the customer borrows money and repays it with an additional amount over a period of time. The additional amount is considered interest on money borrowed which is prohibited in Islam.
The main duties of the SSB are to direct, review and supervise the business operations of the Bank to ensure that they are in line with the applicable Shariah rules and principles as outlined in the AAOIFI(Accounting and auditing organisation for Islamic financial institutions) Shariah Standards.
Yes, please ensure that you activate your card at your nearest branch for international usage. Just a tip for you, do not rely on any one bank card while
travelling internationally since you could experience timeout and network problems.