1. Learning Outcome Assessment III Instructor Name: Sanobar Anjum
An Islamic Perspectives of loans & Interests in contrast with Commercial Banks
Learning Outcome Assessment III
ASSE 4311
Finance
Instructor Name: Sanobar Anjum
Submitted by:
Rahma Alkhuder

2. Outline Research design Literature Review Background
Introduction
Motivation
Problem Description/statement
Formulation of a hypothesis
Research methodology or strategy
Literature Review
Background
Analysis & Interpretation
Findings and Conclusion

3. Research design Introduction
The core business objective of ordinary commercial banks is to make profit by lending money at interest rate. Islamic banking operates in a very unusual manner, whereby they do not receive interest on lending.
Muslims have popularized their non interest banking policies, and the number of banks complying with the Muslim policies has increased over the past ten years.
The question that in many people’s mind is how the Islamic banks make profit without imposing interests on lending.

4. Motivation
Muslim Banks operate to make profit rather than interest, a matter that rather contradicts the idea of interest free banking. They have various ways of earning profit without linking the sources directly to loan interests.
Problem Statement
This study intends to investigate the details of the difference that exists between the Islamic banks and ordinary commercial banks.
The research paper would also like to evaluate whether Islamic banks satisfy the qualifications of bank or they are just charitable banks.

5. Formulation of a hypothesis This paper explores a hypothesis:
It is possible for a bank to operate without charging loan interest.
Research methodology
The project will require data collection for testing the preference of Islamic banks over commercial banks data collection here will be a mix of both quantitative and qualitative methods. The next step will be to document an interpretation and description of data results

6. Literature Review
The Islamic financial system has quite a lengthy history. From the very early days, Muslims were able to establish a financial system without interest. The system worked quite effectively. The system worked quite effectively
Usually, Islamic banking, based on the principle of Mudarabah , it ensures a high level of efficiency, equality, steadiness, and progression. When compared to other financial systems, Islamic banking is preferred.
It must be understood that based on Islamic values, any return on capital is only acceptable if it is used in a way that exposes it to some form of business risk.

7. Background of Research
Borrowing and lending loans are among the oldest activities in the world. Islamic banks have unique practices when it comes to the issuing of loans and interests.
Islamic banks have various ways of earning profits without linking the sources directly to loan interests transformation in the Mudarabah the most beneficial tool in Islamic banking
Islamic banks do not prohibit
Islamic banks not only lend resources in cash, but they also sell items on credit without charging any extra payment above the market prices.

8. Analysis & Interpretation
There were two areas of study, one being Muslim and the other a distributed population. The target population was all the people living in the two areas However, the accessible population was the men and women in these categories, aged between thirty and forty years. The respondents are a total of 120 people per gender, per area.

9. Interpretation
Islamic banking is the method of banking that relates to the strength, philosophy, and the norms of Islam and the Shariah law
As a result, they operate three main types of accounts
Investment accounts, current accounts, and savings accounts
Islamic banking should ignore dealing in any transactions that create uncertainties, caused by little information. Also they should not take part in anything that is illegal also known as Haram
These banks fix their attention on tools of investment which are in tandem with the Shariah. These are through:
Mushraka,
Mudarabah
Finance based on an approximated return rate

10. Findings and Conclusion
the Islamic banking is more balanced , as well they have a simpler finance structure than other banks, thereby exposing them to fewer risks.
Conclusion
In conclusion, the fact that Islamic banks do not charge interest on loans does not make them less a bank. Islamic banks experience a decrease in risk degrees and an increase in profits, compared to commercial banks. Therefore, this confirms the hypothesis that it is possible for a bank to operate without charging interest on loans.

11. References
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Monzer, K. & Tariqullah, K. (2003). Principles of Islamic Financing: A survey. Malaysia: Islamic Research and Training Institute.
Yahia, A. (2001). Islamic Home Financing in the United States. USA: American Finance House.
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