DISTINCTION AMONG ISLAMIC BANKS & CONVENTIONAL BANKS

Conventional Banks	Islamic Banks
1. Conventional Banks work on man made principles.	1. Islamic banking work on the basis of Islamic Shariah.
2. Predetermined rate of interest.	2. In Islamic banks there is risk sharing between provider of capital (investor) and the user of funds (entrepreneur).
3. maximizing profit with out any restriction	3.  but in IB profit subject to Shariah restrictions.
4. It does not deal with Zakat Properly.	4. In Islamic banking system, it has become one of the service-oriented functions of the Islamic banks to be a Zakat Collection Centre and they also pay out their Zakat.
5. Profit from lending money is the core business of conventional banks.	5. Partnership business is the fundamental function of the Islamic banks. So we have to understand our customer’s business very well.
6. It charge additional money (penalty and compounded interest) in case of defaulters for it self.	6. The Islamic banks have no provision to charge any extra money from the defaulters. If penalty is charged will go to charity account it will not become Bank’s profit
7. For interest-based commercial banks, borrowing from the money market is relatively easier.	7. For the Islamic banks, it must be based on a Shariah approved underlying transaction.
8. Since income from the advances is fixed, it gives little importance to developing expertise in project appraisal and evaluations.	8. Since it shares profit and loss, the Islamic banks pay greater attention to developing project appraisal and evaluations.
9. The conventional banks give greater emphasis on credit-worthiness of the clients.	9. The Islamic banks, on the other hand, give greater emphasis on the viability of the projects.
10. The status of a conventional bank, in relation to its clients, is that of creditor and debtors.	10. The status of Islamic bank in relation to its clients is that of partners, investors and trader, buyer and seller.
11. A conventional bank has to guarantee all its deposits.	11. Islamic bank can only guarantee deposits for current account, which is based on the principle of al-wadiah or QARD, thus the depositors are guaranteed repayment of their funds, however if the account is based on the mudarabah concept, client share in a profit and loss.