Parallelism between Interest Rate and Profit Rate: Comparison of Islamic Banking and Conventional Banking

Abstract

The most general argument about Islamic finance is that there is no difference at all between Islamic finance and conventional finance in practice since there exists parallelism between interest rate and profit rate. Some people claim that Islamic finance merely involves change in name. These people state the doubtful situation which is parallelism between interest rate that offering by conventional banks and profit rate that distributed by Islamic financial institutions to prove their arguments against Islamic finance. Aim of this article is to investigate arguments about the mentioned issue above and try to clarify doubts about Islamic finance.