Comparative Banking - Will Non-Profit Bank Management Work?
1. INTRODUCTION
Islamic Banking or interest-free banking as it may be called can easily be understood as a banking system where interest is not charged. Borrowed income can only be obtained from a certain amount of value creation. Therefore, non-profit banking only saves profits. All other types of interests are not allowed.
2. DISCUSSION / Comparison
Discussing this topic logically in this brief paper, it may be wise; to perform a comparative test and compare nonprofit banking compared to the standard banking system prevalent today. Therefore, to compare profit sharing with loss on interest rate.
1 - Savings and Funds
These are the two most important factors in economic growth and development in any economy. Contrary to popular fears, which shows that the denial of interests could reduce savings rates and could reverse economic growth and development. Rising interest rates, reduce the borrower's income. It therefore reduces his ability to save / invest. This is because of the cost (interest) of the loans he borrows.
2 - Inefficiency and inflation
When interest rates are high, capital costs are high and ultimately production costs are also high. This results in a decrease in business volume thus leading to the closure of production units, retrenchment of staff to reduce costs or because their jobs are no longer needed, and producers may decide to increase the prices of their goods and services to balance their 'cost / revenue trends. Therefore, inflation is caused.
3 - Profitability and productivity
Profit sharing promises the benefits of promoting risk-free firms with higher returns than the interest rate on investors. Decreased interest rates and dividends may be less than interest rates, and profit and loss operations may have a lower impact on the economy than interest rates. With finance and firms borrowing from them, the profit and loss sharing system is much better and more efficient.
3. THE RISK SPREAD
With the prohibition of interests; stock options, debts, transaction papers, financial liabilities, bank acceptance will no longer exist (at least on their interest forms). This does not in any way prevent the investment opportunities / portfolios available from banks. This is because some assets representing profit-sharing arrangements will also be available automatically. Therefore, preferred stock names, transaction papers etc.
In the Islamic financial system, the acquisition of assets with various risk factors may be obvious and there is no reason to assume that there is a wide range of assets in such a system.
4. CONCLUSION
In view of the above, it is clear that interest-free banking is about to continue. I have no doubt that in those assumptions, which can be taken from the above comparison, non-interest banking, will succeed. This is because ‘profit sharing’ is high compared to other macro-economic policy tools (i.e., ‘interest charging’). Profit sharing is quality, many other economic tools often do not. This quality is stable
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