What Are Sharia and Conventional Banks Different?

Some of you may still be wondering or confused when opening an account, what is the difference between Islamic and conventional banks?

Besides the increasing number of interested ones lately, Islamic banks also offer advantages in the form of interest free interest. Er, but, conventional banks still have more enthusiasts and their counters are scattered everywhere. Relax, you don’t need to be confused or afraid to choose the wrong one. Let’s see what are the differences between Islamic and conventional banks below:

Interested in the video version? let’s check this video.

1. Different Islamic and conventional banks from legal sources

As the name implies, all transactions that occur in a shariah bank using a policy in accordance with Islamic law are derived from the Qur’an, Hadith, and Muslim scholars (MUI). Whereas in conventional banks, all transactions are based on the prevailing laws and regulations in Indonesia.

2. The contract used is different

There are several contracts used in Islamic banks, namely wadiah (goods / money deposit agreement), mudharabah (fund provider cooperation agreement and fund manager), musyarakah (business cooperation agreement with the portion of each fund), murabahah (goods financing contract and buyers pay more in accordance with what was agreed upon), and so on. As for conventional banks, a contract (agreement) is created based on positive law in accordance with what was explained in point one.

Also Read: Recognizing the Mudharabah Agreements in Islam and the Practice of Giving in the Shariah Banking System.
3. Differences in how you make a profit

Please note, both Islamic and conventional banks are business institutions that are both looking for profit. Therefore, Islamic banks do not mean social institutions or charitable organizations formed without expecting a dime of profit.

The difference between Islamic and conventional banks lies in how to get their respective benefits. Islamic banks implement a profit sharing system and prohibit the application of usury because it is forbidden in Islam. Unlike conventional banks that still practice the interest system for profit.

4. The nature of the two installments is also different

Installments on Islamic banks are permanent, clear, and transparent because they are in accordance with the contract agreed at the beginning of the agreement between the customer and the bank. The installments on conventional banks often only apply in certain periods which will experience fluctuations in the future and are often more profitable for the bank than the customer.

5. Difference between the supervisory authority

Both are still monitored by the Financial Services Authority and Bank Indonesia. But the difference lies in the existence of the Sharia Supervisory Board (DPS). Islamic banks require the presence of DPS positions, whereas conventional banks do not. You can also visit Qazwa’s related Youtube channel


6. Different from the side of the bank’s relationship with customers

Islamic banks consider relationships with customers like partners or coworkers where the reciprocal relationships that occur are mutually beneficial to one another. Whereas conventional banks build relationships with customers such as debtors and creditors or other emotional relationships to attract the attention and loyalty of customers.

7. Finally, the way to resolve disputes is different

If there is a dispute with the customer, the Islamic bank will resolve the problem through deliberation first, then later through the religious court if the consensus agreement has not yet reached. In contrast to conventional banks, disputes will be immediately resolved through district court law.

From the explanation above, I hope you are not confused anymore what is the difference between Islamic and conventional banks. Oh yes, for those of you who are interested in the topic of Islamic economics, you can check other articles in the rubric of Islamic Economics .


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