MUSLIMCREED Islamic banks adhere to an Islamic code of ethics known as Shariah law, which is based on the Koran and dictates how you should behave in your daily life. Although there are Islamic banks all over the world, they are most prevalent in the Middle East and Southeast Asia due to their Muslim populations. This type of banking may be appealing to Muslims, but it has some serious drawbacks that you’ll want to consider before signing up. The advantages and disadvantages of an Islamic bank can help you make a decision about whether or not this type of banking will work for you as a university student.
Pro: You can get an Islamic banking loan without paying interest
In many cases, the borrower pays a fee called profit to the lender. This is just like interest, but it is paid at the end of the term. Profits are usually calculated as a percentage of the principal amount or on an annualized basis.
Con: You may have to pay extra fees with an Islamic banking loan
While there are many advantages to an Islamic bank loan, there may be extra charges with an Islamic banking loan. For example, if you have to make a late payment or want to extend the due date on your loan, you will incur a fee. That means if you are looking for help with your budgeting and finances, it may be worth looking into a conventional bank loan instead.
Pro: You can open an Islamic banking account with no minimum balance requirements
It is one of the great benefits to having an account with an Islamic bank is that there are no minimum required balances. You can open a savings account, even if you don’t have much money to put into it.
Con: Some Islamic banks charge higher fees than conventional banks
One disadvantage for an Islamic bank is that it may charge higher fees. This is particularly true if you are a university student. For example, university students at the National University of Singapore will be charged a fee of $24 per month just to keep their account open. On the other hand, if they used a conventional bank they would only be charged $5 per month.
Conventional banks also offer more scholarships and grants than an Islamic bank does.
Pro: Your money is invested in accordance with Sharia law
Islamic banking is a model to invest your money without having to worry about it being invested in unethical ways, such as alcohol, gambling or pork-related products. Your money is also invested in accordance with Sharia law, which prohibits the use of any interest earned from borrowing money. This means that you’re not paying any interest on the money you’ve borrowed.
Con: You may not be able to get as high of a return on your investment with an Islamic bank
Islamic banks are a viable option to consider, but there are some trade-offs. One is the amount of interest that you’ll get on your investment. Interest rates vary from bank to bank, so it’s important to do your research before signing up with one. In general, you may not be able to get as high of a return on your investment with an Islamic bank.
Pro: You can feel good about supporting a system that adheres to your religious beliefs
The concept of Islamic banking refers to a system that aims to adhere to the principles of Sharia law, and among these principles is a prohibition against interest. Since many banks in the Western countries are charging high interest rates, it can be difficult to find an alternative that supports your religious beliefs. However, there are some disadvantages to being a Muslim student who is thinking about taking out a loan or saving money at an Islamic bank.
Con: There are fewer Islamic banks to choose from
Islamic banks are fewer in number than conventional banks, so even if you do find a bank that offers the type of account you need, there may not be as many branches or ATMs nearby. So if you’re looking to be close to an ATM, this might not be the best choice.