A theoretical comparison of profit-sharing banking with conventional banking (Ph.D. Dissertation)

This work compares conventional and profit-sharing banking methods under three criteria: the degree of risk, the amount of collateral required by conventional banks to guarantee deposits, and the advantages accrued to a banking system that deals primarily with consumer (as opposed to income earning) clients. The thesis discusses the strategic advantage an Islamic bank has in this context, mostly due to the effect of Islamic laws and practices on the Muslim actor. Emphasis is placed on personal relationships and trust among depositors, banks, and entrepreneurs, and the expected profits and risks that each faces. The study is structured as a model and is micro-oriented. The aim is to determine the conditions under which a profit-sharing institution can successfully compete with a conventional bank.