Comparative Business Characteristics Of Islamic Financial Institutions And Traditional Banks

Abstract

This paper identifies the distinctive features of Islamic financial institutions and traditional secular banks based on loan interest. The relevance of this study is caused by the need to assess the integration of the Islamic financial model into the financial system of national economies with the non-Muslim population. In recent years, Western European countries have taken an active interest in increasing cooperation with Islamic banks from the Persian Gulf countries thus expanding their activities and transforming their financial relations. Such cooperation is based on the complementarity of two financial models of banking. This issue is particularly acute given the increase in sanctions pressure and the ban on Russia’s largest banks to attract funding from many Western countries for more than 30 days. But in order to achieve effective synergy between the two models it is important to make a comparative analysis thus providing theoretical and methodological integration. The paper presents a brief description of the development of the Islamic financial activity model. The concept of activities of Islamic financial institutions in the classification of transactions carried out by Islamic banks and other organizations engaged in insurance, trade and settlement activities is considered. The approaches of the scientific community to assessing the efficiency of Islamic financial institutions are reviewed. The main differences between Islamic financial institutions and secular commercial banks are systematized and grouped by classification criterion with identification of their peculiarities. The main structural, standard, regulatory, and infrastructure problems in the development of the Islamic financial model are defined.