FINANCIAL PERFORMANCE OF ISLAMIC AND CONVENTIOANAL BANK IN PAKISTAN A COMPERTIVE STUDY
INTRODUCTION
Background of study
Islamic banking having different ways of functions as appraise to conventional bank has been began in the nineteen seventies to deal with the issue of Riba. The devoted and innovative individuals, specialized banker, Islamic economic experts and religious scholars are certified to be cause the way of Islamic banking. Its viewpoint and concepts are, however, not new having been outline in the Holy Quran and the Sunnah of Prophet Muhammad (p.b.u.h) more than 1400 years ago. The overall look of Islamic banking is often relevant to the activation of Islamic financial system which is completely usury (Riba) completely free. There
In Pakistan the whole banking industry is controlled by State bank of Pakistan which is also known as Main Central bank of Pakistan. Bank is known as financial institutions and they are performing financial actions. The central bank of Pakistan also manages the different problems of the commercial banks. The Main central bank creates and manages the financial plan to control the increasing prices and deflation in the nation. Also provides cleaning house service to all the planned banks of the nation. Banks generally execute down payment and loaning functions in an economic system. The constant banking industry is the primary need of the every economic system. There are more than 20 routine banks and all of these are active now a day to play a role their discuss in growth of the economic system. In every industry of the nation, fund is the primary need and that is the main resource for advertising the company. In Pakistan almost all kinds of banks are doing working. Now a day banks are not only limited to execute solutions such as like boundaries buy worldwide. These banks are almost executing all kinds of solutions such as like offering different kinds of financial loans such as a Cash Credit, Bank Overdraft account service, ATM Card service Operating fund service, set down payment service, benefit and loss preserving account service, resources shifting service, Car financial loans service and
Conventional bank follows traditional (interest-based) theory while Islamic banking is depending on zero attention theory and theory of Profit and loss (PLS) discussing in performing their businesses as intermediaries. Reasoning behind prohibition of attention and the Significance of Profit and Loss discussing in Islamic bank has been mentioned in many Islamic bank factors studies. Islamic Profit and Loss principle makes the relationship of financial trust and collaboration between client, loan provider and negotiator (Yudistira, 2003).
2. Islamic finance is a financial system with the aim to meet up with the educating of Holy Quran in distinction to getting highest possible return on financial resources. Islamic moral standards are the main Priority of Islamic financial system. These standards of Islamic values are mentioned by the Shari’ah legalize all dealings in an Islamic financial system. At a beginning, an Islamic financial system can be defined as a “Fair” and a “Free” program where “Fairness” is the prime