Financing and banking in the contemporary age are linked with most aspects of life. From purchasing a new phone to acquiring a home, financing occupies a notable position as long as the issue of loaning is concerned. Before the onset of the 19th century, conventional banking controlled nearly 100% loan market share, banking sector, and financing issues. Everything was simple to them since there was no competition from any other related business segment. The 21st century is characterized by the technological shift that has affected the business frameworks (Yudistira 16). The banking system is facing emerging growth regarding religious elements, featuring in the finance world. Islam as a second largest religion has a sprouting financing system that is comparable to the conventional types in many ways. The discovery and accelerated adoption of Islamic banking systems produced a twist in the financial, banking and loaning sector that astonished the Western World where conventional banking had laid a strong foundation. In the global financial market, conventional banking systems far much out the way the Islamic financing system. Although the Islamic financial system occupies the smallest percentage, the contribution in the global financing market is significant. Currently, there are 75 nations in the whole world that have adopted the Islamic banking systems with only 45 countries originating from Muslim affiliated territories. It means that the thirty nations originate from non-Muslim countries (Abu Dhabi Islamic Bank). The overall interpretation means that the global financial market is showing some significant towards the Islamic banking system as a modern financial interface.
With the competition that Islamic banking systems are giving to the ordinary financing systems pushing the world to believe that financial systems can produce various forms. The Islamic financial system means to the world, a contemporary financing structure. Back then, Marxism and Capitalism dominated the global financing world as two primary concepts. However, Islamic banking concept came almost as an astonishment to the westernized banking systems and the Eastern World, particularly the Arab nations became motivated to venture into the banking industry (Abu Dhabi Islamic Bank). The banking industry since the introduction of the Islamic financing has changed due to pressure and competition offered by the conventional banking sector. The Islamic banking has registered a fast financing growth pace that is characterized by a huge market share grabbed from the conventional banking segment. It has now been regarded as the fastest growing Ethical Financing sector in the Eastern World. The notable shift in the banking industry offers credit to the Islamic Banking for bringing an intensified competition in the interest-based conventional financial system. The global corporate financing world has the conventional banking system occupying a central position. Therefore, it is worth acknowledging the importance of setting the footprints in the banking industry since, as a world financial pioneer, it is the sole major yardstick for the Islamic banking system.
The benefits and drawbacks of each banking system are dependent on the nature of the region in which it operates and the economic condition of the country it operates. There is a noteworthy difference between the two banking systems, and the mode of comparison explores the concepts of the business framework, material balance and the balance of ethical and moral grounds in the business. The other areas that exhibit discrepancies for the two financial systems are the areas of loss and profit sharing and the concept of equity financing on risks to capital. One motivating factor in the research regarding the research about Islamic banking is the widespread attempt by economic specialists to ascertain the reason the type of financial, banking was not affected by the world economic crisis of the year 2008….