Islamic Finance For Dummies

Chapter 7

Contrasting Conventional and Islamic Commercial Banking

In This Chapter

Understanding the many functions of commercial banks

Eyeing commercial banks’ organizational structure

Spotting the divisions between conventional and Islamic commercial banks

Once upon a time, the joke was that if you didn’t trust your money to be safe in a bank, you stuffed it into a mattress or perhaps buried it in the backyard in a Mason jar or two. But can you honestly imagine life today without commercial banks? Even if you don’t have a savings account (which I won’t lecture you about; I’ll leave that one to your parents or spouse), I’m going to take a gamble and assume that you have a checking account with a commercial bank. And a credit card (or two or six) issued by a commercial bank. And a car loan held by a commercial bank. And perhaps a mortgage held by a commercial bank.

In recent years, in the midst of financial crises and bailouts and public furor over the seeming lack of accountability for many banking functions, some people have lost sight of the fact that commercial banks are essential service organizations. Without them, the Western way of life would change dramatically. (Can you ...