Financial Engineering
Product Innovation: Islamic Banks Vs Conventional Banks
Lecture Sketch
Muhammad Abubakar Siddique
February 10, 2022
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Islamic Banks are more innovative as compare to their convectional counterpart. Conventional Banks (CBs) have only one mode of Loan upon which they engineer their all products and services. In fact, CBs do nothing but manipulate LOAN. Some times they call it current account, some times they name it Saving account, sometime they call it car lease etc. They only have one mode “LOAN”. They build same relationship with their all customers of various products and that is “Creditor-Debtor relationship”. In Deposit side, CBs are debtors and Customers-depositors are creditors and vice versa in Asset side. How can CBs claim that they are innovative!
In fact product innovation exists in Islamic banking where each product is based on different mode. Islamic banks have various modes upon which they engineer their products and services. They do not have same relationship with their customers in all products see following Figure.
