NURUL AIN NADHIRAH BINTI MD HANAFI (A18B0691) According to the video of the title “How Islamic Banking works”, it can be summarize based on my understanding about the different between Conventional and Islamic finance. Firstly, we can see the different on buying and selling something real. As for Islamic Bank, there will always have business transaction between customer and bank in order to get financing. Islamic bank will invest in actual assets and services such buy machinery, lease out cars. Meanwhile for Conventional bank, customer will get loans but they need to repay with interest rate based loans. Basically for the profit that earn by both Islamic and Conventional bank, they have their own ways which for Islamic bank, their will earn profit from mark-up price and for Conventional, their earn profit from interest rate.Then, from my opinion about interest rate, the higher amount that you borrow from the bank, the higher interest rate will be charged. It stated from video, Conventional bank will lend money to the borrower based on personal income. If the borrower cannot make a repay of that money, Conventional bank will compound the interest rate. It also saying from the video, asset and services cannot simply compounded like we can compound interest based loans. An asset and services can only have one buyer and one seller at any given time. Last but not least, the key difference among the two are that Conventional banks earn money by charging interest on products or fees for services rendered whereas Islamic banking earns their money through profit and loss sharing and other Shariah-compliant contracts of exchange.

NUR ALIA AFIQAH BINTI MOHD BILAL (A18B0529)Based on the video "How Islamic Banking Works", it explains the comparison between Islamic Finance and Conventional Finance. From my understanding, conventional bank will impose high interest rate to their customer that apply loans from the bank and also impose compound to the customer that fail to make a payment on time. Basically, we acknowledged that conventional bank gets profit from interest rate charge to their customer. However, in Islamic bank when the customer wants to get a financing from the bank they only invests in actual assets and services like buy machinery, lease out cars and invest in business in order to give financing to their customers. Besides, in Islamic bank they only allows one buyer and one seller at any given time. So basically, Islamic bank earn their profit by markup. Moreover, in Islamic Finance they also buy and selling something real while Conventional Finance borrowing and lending something flitting. After that, conventional finance also sells money when there is no money, sells assets before they exist, allow debt to grow unchecked and creates artificial supply that all of this causes high inflation, heightened volatility and economic disparity. Last but not least, we believe that conventional bank aims to maximize returns on the products and services whereas Islamic bank endeavors to help the public.

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 Beside, Islamic finance involve in buying and selling something real, but Conventional finance borrowing a lending something not clear resource. Second, about problem with artificial wealth creation. This happen because exist compound interest personal loan, business loan and World Bank loan in conventional bank. Effect from that, occurrence unpaid load which is the value compound interest growth so fast and lender woes. Interest also can make global financial meltdown. Actually, interest in conventional bank mostly give negative effect and not alternate forms of finance. Third, this video have shown me, ‘how does Islamic finance make money’. Islamic bank only invest in actual assets and service, for example buy machinery, lease out cars and invest in small business. In Islamic bank assets and service cannot compound. Thus, only involve one buyer and one seller. Fourth, involve Islamic finance principles. The principle interest-free in Islamic bank can imply that Islamic finance is better than conventional bank. Lastly, I know about the interest issue debt-laden developing country that happen to Abasanjo, Ex-president, Nigeria.     

 Besides that, the other different is conventional finance sells money when no money ,sells asset before they exist, allows debt to grow unchecked, interest creates artificial supply the result make by real assets such as increase inflation, heightened volatility and economic disparity.

For my opinion about interest rate it is amount that bank charge for the use of assets. The assets borrowed could include cash, consumer goods, or large assets such as a vehicle or building.

 

Base on the video “How Islamic Banking Work” what can I summarize is different between Islamic Finance and Conventional Finance. In Conventional Financing, lenders lend to borrowers to make a profit from the interest charged on the principal amount. For property loans, borrowers pay an interest on the outstanding principal amount. Interest rates can be a fixed rate or based on a floating rate. In Islamic Finance, lenders only get interest in actual assets and the services and assets and services cannot get the compound. After that, in conventional finance also have compound and unpaid loans. In Islamic finance that only have one buyer and one seller. Next, conventional finance will sell money when they not have money and sell assets before they exist. I think that all my opinion about Islamic finance and conventional finance

There is different between Islamic finance and conventional. For example, let say $10,000 invest on conventional bank and Islamic bank, what both of institutions can do. Firstly the conventional bank will finds the credits worthily customers and lends at 5% interest and 7% and 10%. While in Islamic finance, there only in actual assets and services in might buy machinery, lease out cars or invest in business but the transaction is always tied to a real assets or service only. So, there can’t simply compound assets and services there can only have one buyers and one sellers at any given times. Interest on the other hand allows cash to circulate and grow into enormous sums. 

The difference is Islamic finance usually buying and selling something real. While conventional finances is borrowing and lending something fleeting. Based on my understanding, we can learn that conventional finance enables ability to sell money when there is no money to sell assets before to underlying asset and allow debts to grow unchecked while borrowers becomes more desperate. While the Islamic finance also avoid from the element that prohibited in shariah Islam which is gharar, riba and maysir. Lastly we can see that Islamic finance is better than conventional finance.

Sharia prohibits riba, or usury, defined as interest paid on all loans of money (although some Muslims dispute whether there is a consensus that interest is equivalent to riba). Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam ("sinful and prohibited").

 Besides that, the other different is conventional finance sells money when no money ,sells asset before they exist, allows debt to grow unchecked, interest creates artificial supply the result make by real assets such as increase inflation, heightened volatility and economic disparity.

For my opinion about interest rate it is amount that bank charge for the use of assets. The assets borrowed could include cash, consumer goods, or large assets such as a vehicle or building.

Islamic Financing avoids interest-based transactions (riba), and instead introduces the concept of buying something on the borrower’s behalf, and selling it back to the borrower at profit. In place of interest, a profit rate is defined in the contract. Like Conventional Financing, profit rates can be a fixed rate, or based on a floating rate . The majority of Islamic home financing options in Malaysia today are based on the Bai Bithamin Ajil concept. A small number of alternatives are based on the Musyarakah Mutanaqisah  concept.