The main difference between how conventional banking and Islamic banking works lies in their way of making a profit. Now you might be thinking Islamic banks are giving loans at a loss and not making a dime. Hate to break it to you, but they most definitely are making a profit.
So here is the thing, a conventional bank makes money through the interest rate they charge from each borrower. Whereas, the Islamic bank buys a commodity on behalf of the borrower, sells it at a higher price, and makes a profit. The profit is equivalent to the interest rate since interest is not allowed in Islam.
The benefits of Islamic banking include less late payment fees/penalty, the amount to repay remains fixed, and you do not have to pay early settlement fees either.
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