Notes

Islamic Banking and Finance
Banking and Finance describe the fast-moving world of funds, credit, investments and money. Finance is a necessary part of modern economy, as it gives the necessary liquidity in terms of cash or assets needed for businesses and individuals to invest for the better future. Banks play an important role in all economic activity. They provide monetary services and act as intermediaries to facilitate trade between borrowers and lenders.

In modern banking and finance system, banks lend money to businesses or individuals that need short term money to purchase goods and services. The money is then repaid from earnings of the business or from surplus cash created by the firm. There are two types of banks namely commercial banks and savings and lending institutions (S & L). The main difference between them is that S & Ls lend longer term loans at higher interest rates than commercial banks. They also engage in long-term transactions, such as buying and selling of securities, foreign currencies, bonds, equities, derivatives, and financial instruments. Commercial banks are major players in the financing sector.

The main difference between a bank and a lending institution is that a bank makes loans only after satisfying its customers that they will repay the loaned amount and on time. Commercial banks, on the other hand, make loans on the basis of credit requirements. For instance, a bank may extend credit to a house owner to buy a new house. A bank will not extend credit to a person who has bad credit history or if he cannot produce any collateral to back up the loan amount. One of the most prominent differences between a bank and a lending institution is that the latter mostly deals in cash and may not deal with credit at all. It may, however, provide small amounts of cash in the form of a check as a payment for services such as ATM and credit card purchases.

One of the reasons why many small businesses do not go through this stage is that they do not know how to get started. Moreover, they also lack the experience of navigating through the intricacies of the banking and finance systems. Small firms usually have limited staff and resources. Without proper knowledge about banking and finance , it would be difficult for them to get started and grow.

Banks, on the other hand, can be a great option for start-ups because they have comprehensive knowledge about the financial markets. With years of experience in dealing with all types of finance issues, these firms can provide vital support to budding entrepreneurs. Moreover, in addition to having knowledgeable staff, banks offer a wide range of investment options such as borrowing for start-up purposes and for growing assets. These financial institutions can provide information regarding the various banking and finance options that are available depending on the type of business a firm wants to set up.

In today's competitive banking market, there is fierce competition among lenders and financial institutions. This results in an environment where savings, interest rates, and other fees are generally lower compared to the past. In addition, customers now have more choices as to where they can obtain banking services. Most bank websites provide comprehensive information about the different banking options offered by different financial institutions including checking accounts, savings accounts, personal loans, business loans, auto loans, and credit cards.

Many Islamic banks also provide insurance services such as investment and insurance policies, mutual funds, and other products. Smaller Islamic banks tend to specialize in one particular product or service while larger ones offer a wide variety of products. Some of these banks may even provide online banking services. The goal of an Islamic financial institution is to offer low interest loans, high quality financial products, and superior customer services.

Another main difference between non-banking finance is that services provided by Islamic financial institutions are available without a referral or a contract. In other words, customers can get financial advice and services without being bound by any contract or agreement between the individual or the bank. This is a very important service considering the rising need for advice on banking matters. Additionally, clients do not usually have to obtain a referral to get a free financial assessment. This is another key advantage of Islamic banking over non-Islamic banking.
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