Comparative Study between Murabaha and conventional loan and finance practices in Sri Lanka (special reference to products and services)

Abstract

Banks play a vital role in every aspects of economy that provide financial solutions to empower the business life of individual and the community. The survival and success of banks depend on their appropriate products and services. Consequently, conventional and Islamic banks offer variety of loans products which seem similar in the outlook but should have dissimilarity in the contract. Therefore, this study aims to make a comparative analysis of Murabaha based loan offered by the Islamic banks over conventional loan. And Islamic bank was compare with conventional banks instead of being used for Islamic banking products and services. The researchers have applied the qualitative research method. And the data was collected for this study was from both primary and secondary sources. Primary data were collected through direct interview and discussion while Secondary data were gathered from journal articles, other research papers, books, annual reports of banks, and official websites if IFIs. Researchers chose Amana Bank, LOLC AL- Falah which are considered as Islamic Bank and Islamic window and Peoples Bank, Hatton National Bank which are conventional banks in Akkaraipattu branch, are used as random sample of this study. According to this study, the findings identified that, Islamic bank products and services are conceptually different from conventional sector though the outlook of the products are similar in the practice. As a result of that issues, this study clearly mentioned that, because, both banks use different contracts for their loan facilities.