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Introduction

Risk Analysis Of Islamic & Conventional Banks In Pakistan

Islamic banks buy grey uggs australia boot on sale are a key source to earn profit without Riba(interest) . According to Islamic law Riba(interest) is prohibited in Islam and in any trading activities. "The funds of the customers are placed in profit sharing investment and also interest is not paid on the customers deposits a/c in Islamic banking"?(Archer & Karim, 2006). There are a large number of risks which are involved in commercial banks with Islamic banking and also banks without Islamic fianacing. This paper analyze the two ?major risks of the bank, credit risk and liquidity risk. Those convential banks which are using islamic financing have considerable less credit and liquidity risk as comapre to other convential banks which are not using islamic mode of financing ?(How, Karim, & Verhoeven, 2005). This article provide the results regarding islamic banks and conventional banks. This paper articulate the buy grey uggs australia boot on sale risks in islamic banks and conventional banks, also provide the psychoanalysis between these two sector. It also contribute to the vast prose on the determinents of bank risks by the simplification of preceding observed findings with respect to a country? that acquire a dual banking structure. Our results show that conventional banks in buy grey uggs australia boot on sale pakistan are more risky than the islamic bank, which have low credit risk and liquidity comparativly.

The remnants of this article is consisting the structure and model of the banks. Which tell the numerical figures related to the risks of conventional banks and islamic banks.

"Islamic banks do not pay interest on customers' deposit accounts. Instead, customers' funds are placed in profit sharing investment accounts" (Archer & Karim, 2006)

Literature Review

Islamic banks offer financial instruments that are consistent with the religious beliefs and cultural characteristics of Muslim societies. The essential feature of Islamic banking is that it is interest-free. 3 Islam prohibits Muslims from taking or giving interest (riba), defined as any predetermined or fixed return from financial transactions including both deposits and loans, regardless of the purpose for which such loans are made or how low the rate of interest charged is. The prohibition of riba is mentioned in four different revelations in the Qur'an,4 which also declares that those who disregard the prohibition of interest are at war with God and His Prophet. Some scholars have also put forward economic reasons as to why interest is banned

in Islam. The main problem of all these financial institutions is the manipulative character of interest. As the financial system in Islam is based entirely on equity basis i.e. the investor of the capital and the entrepreneur shares in the profit as well as loss, the Islamic banks are also conducting their business on the same pattern. I.e. profit and loss sharing principal (Iqbal,Z. 1999). There are a large number of theories on the determinents of risks in islamic banking and conventional banking.

Even in ancient times, people were well aware of risk factor...while taking financial and monetary decision, they knew that lending their money to a person with good background is much safer investment than lending their money to a bankrupt. However, risk is one of the important tools of decision making and now it can also be measured and different values can be assign (ALi & ALgeri, 2003).

Those who advocates the intrest concept in financing holds that intreset factor encourages and motivate the investors to invest thier capital insted of spending the money on consumption (Rabooy, 1991)

There is very genuine book? (M.Ali)which consist the difference table between conventional financing and islamic financing.

Table 1.1 Differences between conventional financing and Islamic financing

Conventional finance