Global Financial Crisis: Islamic Banks versus Conventional Banks

Mossavar-Rahmani, Farhang; Maleki, Hamid
November 2011
International Research Journal of Applied Finance;Nov2011, Vol. 2 Issue 11, p1434
Academic Journal
Many studies have suggested that recent global economic crises have negatively impacted the conventional banking systems more than the Islamic banking system. One reason may be the structural differences between the two systems. In this study we briefly compare and contrast the function of both banking systems before and after the industrial revolution and further examine the impact of the financial crises on both systems with emphasis on the following four areas: Their characteristics Their function as a bank (both in the areas of financial services and investments) Their economic role mainly in the creation of capital The characteristics of their depositors and borrowers The conventional banking system has changed drastically since the industrial revolution. However Islamic banking, which did not exist before the industrial revolution, has been operating based on the same moral principles that were in place since the time of Prophet Mohammed.


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