Islamic banking: compared and analyzed

Interview with Salamatullah, the Executive Vice President and Head of Islamic Banking for the National Bank of Pakistan. Islamic and conventional banks fundamentally differ due to Islamic banking arrangements such as mudaraba where profits earned on deposits are shared between investors and banks. Pakistan has taken steps to amend the House Building Finance Corporation Act to make it shari`a compliant, and within the last several years subsidiary and stand-alone Islamic banks have come into operation. In Islam profits but not interest can be considered rewards for capital investment; the interest earned in conventional banking systems has led to the accumulation of wealth by a few at the expense of the greater good of society. Profits earnings or losses are valued according to the ratio contributed by investors (or a rate agreed upon not below the ratio of investment).