[Solved] Comparison of Deposits between Conventional Banks and Islamic Banks: The Case of United Ar

1.      Introduction

There are distinct differences between the Islamic and the conventional systems of banking, but the major difference is that Islamic banking largely relies on the sharia principle while the conventional banking system is based on interest rates. The sharia-based financial systems majorly encompass the sharing of profits and risks while the interest rate dependent conventional banks utilize the opportunity cost of money. The performance of the banking sector determines the escalation of an economy as it is the link between the investors and the financiers. Currently, the two banking systems have adopted a dual regulatory environment working relationship, with tight competition between them to attract new clients and fulfil their objectives and goals Zarrouk, Ben and Moualhi, 2016). The increased development of new financing methods and tools have escalated this, thereby creating long-term economic growth.

In the case of the United Arab Emirates (UAE), these two types of banks are jointly doing business together in an incredibly competitive market. According to Tabash and Anagreh (2017), the growth of the UAE economy was largely boosted by the performance of Islamic banks compared to conventional ones. This is largely due to their adequate cushion and countermeasure of the 2008 global financial crisis. The crisis partially affected them, and thus, they outclassed the non-Islamic banking institutions in performance. 

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