Differences between Islamic and Conventional Financial Planning
Financial planning is the process of creating strategies in managing financial affairs to meet life goals and the role of the professional financial planner is to analyse the financial circumstances of the client and to provide a plan to meet the client’s financial needs and goals. In carrying out his mission, the financial planner shall provide impartial assistance and act in the best interest of the client. For the Islamic financial planner, the role is the same except that when the client is a Muslim, the life goals are guided by the Shariah and the methods being applied must be Shariah compliant.
The difference between Islamic and Conventional planning is man’s time horizon where the Muslim will live in the Hereafter. Death is when the body and the soul are permanently separated and death can be viewed as the end of time for a person. The Muslim believes that he will be resurrected one day and be judged by his Creator and will continue to live in the Hereafter. This is a major tenet of the Islamic faith. In view of this, the Muslim has needs in the Hereafter and he must make sufficient preparations while living in this world. In conventional financial planning there is nothing to consider for the Hereafter because the conventional man has no notion of the Hereafter and not believe that he will be resurrected and judged by his Creator. All his efforts are for the life in this world, and death is the end of the conventional man’s time horizon. Thus, it is utterly important to bear in mind that in Islamic financial planning, both the planner and the Muslim client have to plan for and are truly concerned with goals and financial strategies for the Hereafter, unlike their conventional counterparts.
The foundation of Islamic financial planning is the Shariah that a complete guide for Muslims to live their lives in this world and for salvation in the Hereafter. This is also making Islamic and...
...Main overview betweenIslamicFinancial System and ConventionalFinancial System : Principles and Operation
There are clear differencesbetween the Islamic principles and conventional principles in the financial system. However, one must refrain from making a direct comparison betweenIslamic system andconventional system. This is because they are extremely different in many ways. The key difference is that Islamic system is based on Shariah foundation. Thus, all dealing, transaction, business approach, product feature, investment focus, responsibility are derived from the Shariah law, which lead to the significant difference in many part of the operations with as of the conventional.
When we talk about financial system, we normally refer to the banking system. The foundation of Islamic banking is based on the Islamic faith and must stay within the limits of Islamic Law or the Shariah in all of its actions and deeds. The original meaning of the Arabic word Shariah is 'the way to the source of life' and is now used to refer to legal system in keeping with the code of behaviour called for by the Holly Qur'an (Koran). Amongst the governing principles of an Islamic...
...DifferencebetweenIslamic economics and conventional economics?
In Islam there is no conflict between matter and soul, as there is no separation between economy and religion. Although Islamic economics is young in comparison with conventional economics, its characteristics, value and essence are appreciated by Muslims and the non-Muslims. The over-arching values ofIslamic economics lie in the principle that it is an economic strategy that can achieve unity and harmony between the material and the spiritual life of the people.
To ensure the true well-being of all individuals, irrespective of their sex, age, race, religion and wealth, Islamic economics does not seek to abolish private property, a practice done by communism, nor does it prevent individuals from serving their self-interest. It recognizes the role of the market forces in the efficient allocation of resources. It seeks to promote brotherhood, socio-economic justice and well-being of all through an integrated role of moral values, market mechanism and good governance. The differencesbetweenconventional and Islamic economics are as listed below.
1. The Role of Moral Values
While conventional economics generally considers the behavior, tastes and preferences of individuals as...
...THE DIFFERENCESBETWEENCONVENTIONAL AND ISLAMIC ACCOUNTING
The concern of this project paper is to explore the differencesbetweenIslamic accounting and its conventional counterpart. The distinctions need to be addressed as both accounting is presently thought of many people as synonymous. There is danger for such kind of perception because the basic building blocks for respective accounting are worlds apart. As for professional accountants who have been taught on the idea for accounting to be ‘objective’ and value-free, the idea for attaching a religion may seems to be embarrassing and unprofessional. However, with the resurgence of Islam globally, the awareness for the need of Islamic accounting arises. Islamic accounting as a whole is able to serve the whole gamut of stakeholders. Its principles do not serve the interest of any particular group, but to the society as a whole which can make corporations accountable for their actions and ensure they comply with Shariah principles.
1.0 1.0 Introduction
It is widely accepted that the primary objective of accounting is to provide useful information to assist users in making economic decisions. Thus, it can be argued that accounting is therefore, a religious obligation. Hence, if accounting is a religious obligation, then the rules...
Islamicfinancial institutions are growing faster all around the world. Most in Muslim countries, conventional and Islamicfinancial institutions exist side by side, interacting with one another. The development of Islamicfinancial institutions has the potential to play a leading role in serving the Muslim Ummah and contribute towards socio-economic development of Muslim countries in conformity with Islamic sensibilities.
Financial institution primarily sell demand deposits, saving deposits, time deposits, insurance policies, pension funds, commercial papers, and bonds to the surplus units. In general financial institution consists of Profit-oriented institutions such as (bank, saving institutions, insurance company and etc.). By providing finances for both consumptions and investment purposes, financial institutions contribute towards the prosperity of household and economic growth in the economy. Conventionalfinancial institution pay interest on funds procured and charged interest on funds loaned out. But Islamic scholar describes interest as riba which is prohibited in Islam. Hence, the participation of Muslims in interest-based contract is considered illegal by the Islamic Law.
Over the past decades, (CSR) disclosure has been the subject of...
Islamic finance system has its basis in great Islamic value. It is Riba-free system ( Riba means interest) which ensures the abolition of profit-sharing from the whole financial system.
Islamic Finance System (IFS) can be categorized with absence of,
Interest based transactions
Interest based financial institution
Unethical and doubtful transactions
Companies’ stocks involved in unlawful activities
And so on and so forth.
IslamicFinancial System is opposite of Conventionalfinancial System i.e system which is based on interest/Riba. The Riba based financial system has been proven as inefficient for the economic balance which is needed in any society. The conventional banking is also of 2 types ; Socialistic and Capitalistic. In Socialistic system, government gets to enjoys freedom whereas in capitalistic system, individuals get to enjoy freedom. But in the light of Shariah in Islamic finance system, restrictive freedom is allowed for both government and individuals. In Islamic finance system, solutions of economic problems are derived from Al-Qur’an and from A hadith of Prophet (S.A.W).It focuses on providing economic opportunities in the society by keeping in consideration political, social and other cultural factors.
Origin of the Report
The report on “Distinguish betweenIslamic & conventional banking” was initiated as part of the Internship Program, which is a BBA Degree requirement of the School of Business of LEADING UNIVERSITY, SYLHET. The report is being submitted to the Mr. Jahangir Alom, Lecturer, Department of Business Administration, Leading University, Sylhet.
Since the BBA program is an integrated, practical and theoretical method of learning, the students of this program are required to have practical exposure in any kind of business organization as last term of this course.
The report focuses on two parts. They are:
• Primary Objective
The main objective of the report is to determine the Islamic banking Dimensions of the Al-Arafah islami Bank limited & the service provided by the bank to the customers.
• Secondary Objective
▪ Briefly observe the Islamic banking environment of Bangladesh. And find Distinguish betweenIslamic & conventional banking
▪ Identify the major strengths of the banks Islamic Banking Service provided to the customers.
Primary Survey – Primary Data has been collected by interviewing the staffs of the Banks.
Secondary Survey - All the necessary data has been collected from the –
• Periodic Bulletins published by the...
... ECONOMICS A SCIENCE. OR ART
Economics as a science refers to a systematic study of certain behavior,it is a systematized body of knowledge to analyse the behavior studied,scientist follow certain steps in other to formulate theories,principle and laws.First they collect data then they systematically analyse and test to understand the behavior of the data set on the basis of tested result they formulate theories principles or laws.
Based on the above it can be seen that economics works in the above scientific pattern but results might not be the same as that of natural science,like every other science the generalizations, theories or laws of economics trace out a casual relationship between two universal validity.
Economics is regarded as an art because it is concerned with application of scientific theory.According to Robbins defination,individuals choose the best possible alternative that depends on the past experience of the individuals. When the scientific theory is applied some practical problem arise and it is countered by learned skills which is an art.
ECONOMICS AS A SOCIAL. SCIENCE OR NATURAL SCIENCE
Economics is a social science because it applies scientific method to sudy human behavior also regarded as the study of the mechanisms by which humans allocate resources.
Reasoning or Logic
Deductive logic inquiry makes use of abstract approach in...
...How Islamic banking system is different from conventional one? 1
Maintenance of CRR/SLR: 4
Project appraisal and evaluation: 4
Basis for collection of deposit 5
Moral Dimension 5
Emphasis on Productivity as compared to credit worthiness 5
Scope of the activities: 6
Guarantee for deposit: 6
Distributive justice and economic stability: 7
Allocate Efficiency: 7
Stability of banking system: 8
Growth of the banking system: 8
Emphasis on the character of the loan applicant: 8
Banking system plays a very important role in the economic life of the nation. The health of the economy is closely related to the soundness of its banking system. In a developing country like Bangladesh the banking systems as a whole play a vital role in the progress of economic development. Modern trade and commerce would almost be impossible without the availability of suitable banking services. Islamic Banking is an integral part of Islamic Economics and thereby an Islamic way of life. Islamic Banking is a special nature of financial intermediary which has not involve in any way with interest. The introduction of interest-free and equity-based financing by the Islamic banking system is based on the principles of Islamic economics.
On the other hand,...