IDEAS home Printed from https://ideas.repec.org/a/scm/ecofrm/v6y2017i3p36.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://ecoforumjournal.ro/index.php/eco/article/view/664/435
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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..
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Belkhir, Mohamed & Grira, Jocelyn & Hassan, M. Kabir & Soumaré, Issouf, 2019. "Islamic banks and political risk: International evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 39-55.
    2. Uddin, Md Akther, 2016. "Reemergence of Islamic Monetary Economics: A Review of Theory and Practice," MPRA Paper 72081, University Library of Munich, Germany.
    3. Sakarya, Burchan, 2016. "Financial Stability of Islamic (Participation) Banks in Turkey," MPRA Paper 69451, University Library of Munich, Germany.
    4. Komijani, Akbar & Taghizadeh-Hesary, Farhad, 2018. "An Overview of Islamic Banking and Finance in Asia," ADBI Working Papers 853, Asian Development Bank Institute.
    5. Ghosh, Saibal, 2019. "Loan delinquency in banking systems: How effective are credit reporting systems?," Research in International Business and Finance, Elsevier, vol. 47(C), pages 220-236.
    6. Hasnie, Syed Sharjeel Ahmad & Collazzo, Pablo & Hassan, M. Kabir, 2022. "Risk assessment of equity-based conventional and islamic stock portfolios," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 363-378.
    7. Hadian , Mehdi, 2017. "Islamic Finance and the Fluctuations of Investment and Output: The Role of Monetary Policy," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 12(3), pages 277-293, July.
    8. Mumtaz Hussain & Asghar Shahmoradi & Rima Turk, 2016. "An Overview of Islamic Finance," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-28, February.
    9. repec:eco:journ2:2017-04-15 is not listed on IDEAS
    10. Domenico Campisi & Simone Gitto & Donato Morea, 2018. "Shari’ah-Compliant Finance: A Possible Novel Paradigm for Green Economy Investments in Italy," Sustainability, MDPI, vol. 10(11), pages 1-12, October.
    11. Monzer Kahf & Amiirah Nabee Mohomed, 2016. "Credit Cards: Contemporary Issues from Economic and Shariah Perspective بطاقات الائتمان: قضايا معاصرة اقتصادية وشرعية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 29(1), pages 57-80, January.
    12. Grira, Jocelyn & Hassan, M. Kabir & Soumaré, Issouf, 2016. "Pricing beliefs: Empirical evidence from the implied cost of deposit insurance for Islamic banks," Economic Modelling, Elsevier, vol. 55(C), pages 152-168.
    13. Saibal Ghosh, 2020. "Access to and use of finance in India: does religion matter?," Indian Economic Review, Springer, vol. 55(1), pages 67-92, June.
    14. Assad Ullah & Xinshun Zhao & Muhammad Abdul Kamal & Adeel Riaz & Bowen Zheng, 2021. "Exploring asymmetric relationship between Islamic banking development and economic growth in Pakistan: Fresh evidence from a non‐linear ARDL approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6168-6187, October.
    15. Simona Franzoni & Asma Ait Allali, 2018. "The Role of the Participatory Depositor in the Governance of Islamic Banks," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(8), pages 154-154, June.
    16. Meslier, Céline & Risfandy, Tastaftiyan & Tarazi, Amine, 2020. "Islamic banks’ equity financing, Shariah supervisory board, and banking environments," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    17. Louhichi, Awatef & Louati, Salma & Boujelbene, Younes, 2020. "The regulations–risk taking nexus under competitive pressure: What about the Islamic banking system?," Research in International Business and Finance, Elsevier, vol. 51(C).
    18. repec:abd:kauiea:v:30:y:2017:i:2:p:33-44 is not listed on IDEAS
    19. Al-Shboul, Mohammad & Maghyereh, Aktham & Hassan, Abul & Molyneux, Phillip, 2020. "Political risk and bank stability in the Middle East and North Africa region," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    20. Mehdi Hadian, 2017. "Procyclicality and The Intensity of Basel III Measures in Islamic Banking: Some Evidence from Iran التقلبات الدورية ومدى تأثير مقررات بازل (3) على الخدمات المصرفية الإسلامية: دروس من التجربة الإيرانية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 30(2), pages 33-44, July.
    21. Hassan, M. Kabir & Aliyu, Sirajo, 2018. "A contemporary survey of islamic banking literature," Journal of Financial Stability, Elsevier, vol. 34(C), pages 12-43.
    22. İsmail Durak & Ergün Eroğlu, 2019. "The Nexus of Economic Growth, Trade Openness and Banking Sector Depth In OIC: An Application of Panel Data Analysis," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 7(2), pages 205-238, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:scm:ecofrm:v:6:y:2017:i:3:p:36. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Iulian Condratov (email available below). General contact details of provider: https://edirc.repec.org/data/feusvro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.