The fierce competetion between the conventional and islamic banks at Case Study

The fierce competetion between the conventional and islamic banks at the Kuwait finance bank in Bahrain - Case Study Example This has resulted in the process of tremendous competition in the marketplace. In an effort to sustain in the well connected and highly competitive global marketplace, companies around the world are significantly asking for large loan amounts in order to fuel their organizational growth needs. On the other hand, the consumers in an attempt to maintain a suitable lifestyle are focusing on the process of acquiring financial support for the purpose of acquiring homes, vehicles and other necessary products and services. This is triggering the need for financial support services from banking institutions around the world. However, the banks in an attempt to maintain profits are providing loans on competitive and attractive interest rates. However, talking on this note, it can be said that the effect of macroeconomic factors like slowdown of productivity in the developed countries, credit crunch and Euro Zone crisis are playing significant roles in the process of determining the rate of in terest on the financial loans in banking systems around the world. ... With the growth of business operation in the Middle Kingdom, a particular style of banking was introduced in an attempt to fund the large scale business operations of that time. During those early days of banking, the financial institutions used to charge riba. The riba in various Arabic and Middle East religions dialects is represented and meant as a bite to the pain inflicted upon the debtor (Ahmed 2011) . Riba in simple terms represents the interest rates on a loan (Bakar, â€Å"Riba and Islamic Banking And Finance†). However, with regards to the Islamic Law which is referred as Shari’aa, Muslims were not allowed to deal in riba and it was declared as a highly prohibited action, which will attract sin. As a result of this, when the Europeans of those times focused on developing the trade channels with the Ottoman Empire by doing business through the interest based loan and banking system, the local business community rejected the offers. This led to the formation of a culture among the Muslim community to avoid loans altogether. In the recent times, a lot of development has happened with regards to the initiative taken King Faisal of Saudi Arabia in 1974 to develop a banking system, which follows the Islamic law (Rahman 2010). The years after that followed a generation of a significant amount of interest for the purpose of building and developing a more sophisticated and modernized version of the pre-existing methods related to Islamic banking. It can be said also highlighted in these regards that the process of re-emergence of the Islamic banking system was to some extent fuelled by the desire of the Muslim communities to stay clear of any kind of financial