[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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