Commercial banks accept deposits and provide loans and financial services, earning a profit from interest paid on loans. Islamic banks adhere to Islamic principles prohibiting interest, using alternative structures like profit-sharing and leasing. A central bank regulates the entire banking system, controlling money supply and acting as a bank for the government, while commercial and Islamic banks deal directly with the public, following central bank guidelines.

1. COMMERCIAL AND
ISLAMIC BANKING
Presenting by: The Spectaculars

2. What is Bank ?
A Business that keeps and lends money
and provides other financial services,
Such as wealth.

3. "A Bank is a place
where they lend an umbrella in
fair weather and ask for it back
when it begins to rain"
-Robert Frost

4. THROWBACK
 As history follows it wasn`t name as bank in
that time.
 One view is that it is derived from an Italian
word ‘banque’ which means a ‘bench’.
 The other point of view is that it has originated
from the German word ‘banc’ which means a
‘joint stock firm’.

5. WHAT IS COMMECIAL BANK?
Commercial bank accepts deposits
from individuals, firms and companies at a lower
rate of interest and gives it at higher rate of
interest to those who need them.

6. Primary Functions
 Accepting Deposits
 Accept various types of deposits from public
I. Current account
II. Saving account
III. Fixed/term deposit account
 Advancing of Loans
 Provide loans and advances of various forms
I. Cash Credit
II. Demand Loans
III. Short-term Loans

7. Secondary Functions
 Special financial services
I. Currency exchange
II. Letters of credit
III. Money transfer
 Agency functions
I. Collection of Checks
II. Collection of Dividends
III. Purchase or sale of Securities
IV. Acting as trustee or executors

8. ISLAMIC BANK
lets invest in our beliefs, enjoy a full
range of Shariah Compliant solutions

9. ISLAMIC BANKING
 Based on the principles of Islamic law
 Prohibition of the collection and payment of
interest by lenders and investors

10. FINANCIAL TERMS
 Contract (Aqad)
 Contract on Loan (Bai' al 'inah)
 Profit Sharing (Mudharabah)
 Safekeeping (Wadiah)
 Joint Venture (Musharakah)
 Cost Plus (Murabahah)
 Leasing (Ijara)
Islam forbids lending out money at Interest, Islamic
rules on transactions known as Fiqh al-Muamalat

11. Fiqh al-Muamalat
 Aqad
 contracts business and marriage parties
 Bai Inah
 sale and buy-back at a lower price
 Mudharabah
 One gives money to another for investing
 Wadiah
 safekeeping, custody, deposit and trust

12.  Musharakah
 profit/loss sharing
 Murabahah
 a profit on the sale of goods
 Ijarah
 providing services and goods temporarily for
a wage
Fiqh al-Muamalat

13. ISLAMIC VS COMMERCIAL BANKING
Islamic bank Commercial bank
 All the functions and operating
modes of are based on the
principles of Islamic Shariah
 It shares risk between the
investor and the entrepreneur
 Maximising profit but subject to
Sharia'h restrictions
 The functions and operating modes
are based on fully manmade
principles
 The investor and lender is
guaranteed of a predetermined rate
of interest or returns
 Maximising profit without any
restrictions

14.  Fundamental function is to
participate in partnership
business
 It must be based on a Shariah
approved underlying
transaction
 fundamental function is to lend
money and get it back with
compound interest
 Interest-based commercial
banks don’t care about the
activities being performed with
their financing
Islamic bank Commercial bank
ISLAMIC VS COMMERCIAL BANKING

15. Central Bank
 A central bank is a monopolized and often
nationalized institution given privileged
control over the production and distribution
of money and credit

16. CENTRAL BANK

17.  Governed by the government
and work for the economic
development
 Controls and regulates the
entire banking system
 Acts as a state owned
institution.
 Act as a banker to the
Government.
 Profit motive banks, held by
government and private sectors as
well
 Operates under the direct control
and supervision of the central
bank
 Acts as a state or private owned
institution.
 Acts as agents of the central bank.
Central bank Other bank
Central Vs Other Banks

18.  Does not deal directly with
the public. It issue guidelines
to commercial banks
 Deals directly with the Public. It
serves the financial requirement
of the public
 Issues currency and control
the supply of money in the
Market
 Does not Issue currency, but
only adds to the approval of the
central bank
Central bank Other bank
Central Vs Other Banks

19. Hope this picture explains a lot to you