Different Ways To Work Conventional Banks And Sharia: Here's The Retail

Different Ways To Work Conventional Banks And Sharia (Imagine Christine Roy - Unsplash)

YOGYAKARTA - Sharia Banking or Conventional Banks in the banking industry certainly have a similar role as intermediation institutions, namely collecting and distributing public funds. However, there are differences between the two institutions. So, what are the different ways conventional and sharia banks work?

Banking Principles

The comparison of Islamic and conventional banks is in principle. Conventional banks refer to the laws and national regulations. On the other hand, Islamic banks run according to Islamic principles sourced from Islamic law which refers to Al-Quran and Hadith. In addition, Islamic banking also refers to fatwas issued by the Indonesian Ulema National Sharia Council. Sharia banking is also free from the Maysir-Gharar-Riba application. Maysir is a gambling, where in a game, the winning party will take advantage of the losing party. Gharar is an uncertainty in transactions because the data is incomplete. Riba is a bonus on a loan or a Ribawi object.

Banking Operational System

The second comparison is in its operations. Conventional banks will practice the interest rate system as a lower reference and profit. On the other hand, Islamic banks practice a system for results in accordance with Nisbah. Nisbah is a comparison that is stated with the percentage to divide business results that are established in the convention between banks and customers. For sharia, interest is a type of usury which is strictly prohibited in Islamic law.

Banking Akad

Unlike conventional banks that offer their products with interest systems, Islamic banks offer their products according to the contract and customer needs. For example, savings products that are found to be banking in sharia using the Wadiah Akad or deposits, investment products using the Mudharabah Akad or for proceeds, financing products.

Relations Between Customers And Banks

Along with the operational system that has been implemented by Islamic banks, it will affect sharia bank ties with its customers. If usually the bonds between conventional banks and their customers as creditors and debtors, to Islamic banks with their customers as business partners, sellers and buyers, or tenants and tenants.

Banking Supervisor

Unlike conventional banks, Islamic banking has a Sharia Supervisory Board (DPS) to properly supervise operational activities. Not only that, the DPS is also tasked with delivering recommendations and advice to the leadership regarding the sharia aspect. Likewise, conventional banks that have sharia business units should also have their DPS.

So after knowing the different ways conventional and sharia banks work, see other interesting news in VOI, it's time to revolutionize news!