The Commercial Banks in Singapore Essay Example | Topics and Well Written Essays - 2750 words

The technical Banks in Singapore - Essay ExampleCommercial chamfers are the backb bingle of any scrimping and they contribute to the economic development in the following ways 1) Promoting capital formation in the economy 2) Promotion of trade and industry through lends and investments 3) Development of land through Agri-financing 4) Transferring surplus capital from developed to less developed regions to allow for balanced development of the economy 5) Encouraging tradees related to export by providing them support so as to improve the GDP of the earth through positive trade (Janan, 2009) b.1. Following are the 5 principles on which the Islamic banking modal valuel operates 1) holiness of contract it must be ensured that the contract is halal (all components valid and not voidable) according to the Sharia rulings 2) find Sharing profit must not be earned by a political party without having a stake in the asset generating the said profit 3) No Riba/Interest money should not be lent to earn additional amount on its underlying value 4) Economic Purpose the operation should be for economic purpose 5) Fairness the terms and conditions should be fair to all parties involved and be disclosed fully to avoid any doubt in the contract (Ahmad & Shabbir) b.2. Advantages of Islamic Banking over stuffy Banking 1) Islamic modes of finance cant be marketed beyond the initial parties of the contract and are withal non-callable both these features protect the financial system from collapsing. Conventional bank lend is a pyramid-shaped chain where one party can further the loan attained from the bank, thus when a financial crisis occurs and one party defaults the whole system crashes. Also, the non-callable feature allows for more certainty as the party is able to keep the loan until its maturity. (Ahmad & Shabbir) 2) Islamic banks bear the liability of getting involved in a transaction with the customer contradictory conventional banks thus they do not ha ve a guaranteed return in form of unconquerable payments from customers (interest) rather they take risk of partnering in a venture with their client. For example in Musharika which is a mode of Islamic finance, the bank gets into a partnership agreement with the client and the profit sharing ratio is concur upon by the parties while the ratio of loss sharing is in proportion to the capital invested by the bank and the client. (Ahmad & Shabbir) 3) The creditworthiness of the client is not the only determining factor in Islamic finance the type, nature, viability, and profitability of the business are the main determining factors. Islam does not allow unethical and immoral business activities, thus lending to businesses such as alcohol, pornography, etc. is forbidden as these activities are also harmful and negatively motivate the productivity of the economy. (Ahamed, 2008)