Want to Know About Theories of Motivation

Difference Between Islamic Banking and Conventional Banking Model

In the portfolio model of traditional or conventional banks and Islamic banks, Islamic banks tend to invest more resources than traditional banks within economic and commercial transactions. Now, these banks are channeling many resources into the procurement of different treasury bills and other government bonds, which tend to produce a higher rate of return, pose little risk, and carry significant tax benefits.

In Muslim countries, businesses have significantly reduced their dependence upon conventional banks by investing and trading through Murabaha operations and substituting them for costly credit lines, which are allowed to finance their funds. The aspects of Ijara or leasing functions that Islamic banks offer now allow businesses to fund their operations.

Within the conventional banking system, the bank’s role is to obtain funds from external sources and advance those as lending activities, generally long-term, i.e., to function as financial intermediation. The bank derives its income by working with credit and debit interest rates. In contrast, Islamic banking does not make industrial, commercial or agricultural-based transactions (Ayub, 2007).

Interest is strictly prohibited in Islamic banking. This collects funds from savers like the traditional bank, which will be used in different operations. However, these operations are based on the principle of participation or the Sharing of Profits and Losses. From a philosophical point of view, customers can make great partners.

If they are remunerated “depositors,” they should consent to risk sharing of the activities financed with these deposits. If they are “borrowers,” the banking institution will advance funds to them and is a partner in such activities.

When an Islamic bank gets involved in resource allocation (deposits of customers), it will act as a trustee of depositors and principals vis-à-vis active capitalists to whom the funds are advances necessary for a start-up. It, therefore, has a double contractual relationship. Important implications arise from this double contractual relationship of a project (Moucharaka). Despite the resulting conflicts of interest, the bank is the big winner (Hijazi & Hanif, 2010).

In fact, while presuming all risks, depositors will pay management charges to the banks. There will be no guarantee over the fixed amount over their deposits as a traditional bank might do but assumes to pay a particular share of the profit generated or, in case of failing this, to debit them with a share of the losses incurred, if applicable.

In addition, the depositors will not benefit from any insurance that is placed against their deposits and do not have any direct control rights over the choice of investment made on the bank’s part. At the same time, Industrialists, who are also partners and agents, will also get a share in the profits, according to a percentage. In case that project tends to suffer from losses, only the banker and the depositors assume them. The entrepreneur’s risk is limited to wasting time and effort (Zaman, 2010).

To ensure specific control over the project’s activities, the bank, which is also a shareholder, insists on having a seat on the board of directors and imposing specific accounting ratios in terms of management if required. This condition is all the more difficult or even normally unacceptable for depositors since the financial institution might need real power of governance over the managers willing to move one step further from the companies in which it invests. Therefore, the entrepreneur’s choice is critical in the agency relationship, which needs to be developed between the bank and its agent.

Financing through Islamic banks is the regulatory shareholder of investment companies and funds. It is the financial institution that, with the help of these funds, holds the right to oversee firms within which these mutual funds are invested. These investors were not the shareholders and held no voting rights. The investors or depositors do not have control over it (Thorsten, 2007).

The Islamic banking sector, not being lenders within the classic sense of the word, enforces any way the aspect of disciplining corporate executives playing the role of the creditor like that of a commercial bank. This needs to be intervened, for example, when the signs of being defaulted on a loan start to appear. On their part, Islamic banks can intervene only as a shareholder through their presence on the board of directors.

Debt forces executives to act in a manner more consistent with the interests of shareholders. This diagram assumes, of course, that the directors do not hold any shares.

In an Islamic context, however, certain nuances apply.

✔️ Financial markets operating within Islamic nations are not much developed compared to markets operating through corporate control.

✔️ Debt financing is strictly forbidden since all financing should be on the part of the equity or, in other words, leasing or Mudaraba. 

However, it can be seen in a circumstance in which the classic pattern of transforming deposits into loans might be losing its ground; these Islamic banks tend to hold a head start over the conventional banking technique in Muslim nations concerning “security” as well as some products to the investors (depositors).

The lead of Islamic banking is that in addition to the religious and psychological satisfaction that customers derive from them, the profits distributed by Islamic banks are always equal to the interest received by depositors from conventional banks for similar amounts (Choong & Ming-Hua, 2006).

Now, the Theories of Motivation post is completed. You can read more or seek help to write content for your website to motivate customers to visit your website.

Need Help or Advice in Academic Writing

See Samples

https://independent.academia.edu/shamsulIslam8

Need Help or Advice in Content Writing Management:

Would you like more advice? Do you have good practices to share? Express yourself in the comments.

Also, if you want help in writing content to drive more traffic and boost conversions; please get in touch through Contact our team.

Do you want help writing quality content, driving traffic to your website, and boosting conversions? You can contact me through my Freelancer.com profile also. I always prefer to work through Freelancer.com for smooth functioning. Here you pay safely and securely.

Read More:

HR Practices Implemented at Marks and Spencer

The Effects of Using Gamification Techniques on Graduate Students

MERGERS AND ACQUISITIONS

Reference

1. Abd.Patah, M. O. R., Radzi, S. M., Abdullah, R., Adzmy, A., AdliZain, R., & Derani, N. (2009). The influence of psychological empowerment on overall job satisfaction of front office receptionists. International Journal of Business and Management, 4(11), 167–176
2. Abedifar, P., P. Molyneux, and A. Tarazi. 2013, “Risk in Islamic Banking.” Review of Finance, No. 6 Vol. 17, pp. 2035–2096.

3. Ahl, H. (2004). Motivation och vuxnas lärande. En kunskapsöversikt och prolematise-ring. Kalmar: Myndigheten för skolutveckling.
4. Atkinson, L., Atkinson, R.., Smith, E., Bem, D., & Nolen-Hoeksema, S. (2000). Hil-gard ́s Introduction to Psycology (13th ed.). Orlando: Harcourt Brace.
5. Ayub, Muhammad (2007). Understanding Islamic Finance. John Wiley & Sons limited, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England
6. Beck, T., A. Demirgüç-Kunt and O. Merrouche, (2013), “Islamic vs. Conventional Banking Business Model, Efficiency and Stability,” Journal of Banking and Finance No. 37 Vol. 2, pp. 433–47.
7. Beck, Thorsten (2007) Efficiency in Financial Intermediation: Theory and Empirical Measurement” in: Microfinance and Public Policy: Outreach, Performance and Efficiency, edited by Bernd Balkenhol, Palgrave, MacMillan
8. Ben Naceur, S., A. Barajas and A. Massara (2015) “Can Islamic Banking Increase Financial Inclusion?” IMF Working Paper 15/31, (Washington: International Monetary Fund).
9. Bergmann, T.J., & Scarpello, V.G. (2001) Compensation Decision Making (4th ed.). Fort Worth: Harcourt, Inc.
10. Cesare, J.D. and Sadri, G., ‘Do All Carrots Look the Same? Examining the Impact of Culture on Employee Motivation’, 2003, Management Research News, vol. 26, no. 1, pp. 29-40.
11. Chapra, M. Umer. (2008), “The Global Financial Crisis: Can Islamic Finance Help Minimize The Severity And Frequency Of Such A Crisis In The Future?” A Paper for the Forum on the Global Financial Crisis held at the Islamic Development Bank.
12. Choong, Beng Soon, and Ming-Hua Liu, 2006, “Islamic Banking: Interest-Free or Interest-Based?” Available at SSRN: http://ssrn.com/abstract=868567
13. Christopher, M. (2005). Meaningful motivation for work motivation theory. Journal of Management Review, 2, 235–238
14. Cihak, Martin and Heiko Hesse (2010): Islamic Banks and Financial Stability: An Empirical Analysis, Journal of Financial Services Research, forthcoming.
15. Čihák, Martin and Heiko Hesse, (2010), “Islamic banks and financial stability: an empirical analysis”, Journal of Financial Services Research, Vol. 38 No.2, pp. 95–113.

16. Dar, H. and T.A. Azami, Global Islamic Finance Report (GIFR) 2012, in BMB Islamic UK Limited. 2012, BMB Islamic UK
17. DiVanna, Joseph A., Understanding Islamic Banking: The Value Proposition That Transcends Cultures (Cambridge, Leonardo and Francis Press 2006)
18. Dries, N., Pepermans, R., & Carlier, O. (2008). Career success: Constructing a multidimensional model. Journal of Vocational Behavior 73, 254–267.

19. Effraty & Sirgy, M. J. (2000). The Effects of Quality of Workers’ Life (QWL) on Employees Behaviour, Social Indicators Research, 22(1), pp. 31 – 47.
20. Elias, H. &Yaakub, N. F. (2009). Job Motivation and Job Performance: Case of Recipients for Excellent Service in a Higher Education. Malaysian Management Review.
21. Foster, J. J. (2000). Motivation in the workplace. In N. Chmiel (Eds.),Introduction to Work and organizational psychology. (p. 302-326). Padstow: Blackwell publishing company.
22. GAGNON C. and BRUNEL ML, “Adult repeaters: motivation and persistence in secondary school studies”, Carriérologie, Revue francophone internationale, vol. 10, n ° 2, p.305 http: //www.carrierologie.uqam.ca/volume10_1-2/17_raccrocheurs/indexhtml
23. Head, T.C. (2011) ‘Douglas McGregor’s legacy: lessons learned, lessons lost’, Journal of Management History, 17 (2), pp. 202-216 JSTOR [Online]. Available at: http://emeraldinsight.com/1751-1348.htm (Accessed: 1 July 2013).
24. Herzberg, F. (1965). The motivation to work among Finnish supervisors. Personnel Psychology, 18, 393–402.
25. Hesse, H., A. Jobst, and J. Sole, (2008), “Trends and Challenges in Islamic Finance,” World Economics, No. 9 Vol. 2, pp. 175–93.
26. Hijazi, T.S., & Hanif, M., (2010). Islamic Housing Finance: A Critical Analysis and Comparison with Conventional Mortgages. Middle Eastern Finance & Economics Issue 6 pages 99-107
27. HUART T., “A theoretical perspective on academic motivation: a concept broken down into multiple facets”, in Cahiers du Service de Pédagogie experientale, University of Liège, 7-8 / 2001, p. 222
28. Imane Bari and Bouchra Radi , “Beyond the Crisis. Is Islamic finance a means of regulation  ? ” ,  Public Ethics [Online], vol. 13, n ° 2 | 2011, Online since 30 October 2012 , connection on 22 February 2021 . URL : http://journals.openedition.org/ethiquepublique/871; DOI : https://doi.org/10.4000/ethiquepublique.871
29. Iqbal, Munawar, and Philip Moyneux, Thirty Years of Islamic Banking – History, Performance and Prospects (New York, Palgrave Macmillan 2005).
30. Jobst, A., (2007), “The Economics of Islamic Finance and Securitization,” IMF Working Paper 07/117, (Washington: International Monetary Fund).
31. Kochan, T., Orlikowski, W., and Cutcher-Gershenfeld, J. (2002) ‘Beyond McGregor’s Theory Y: Human Capital and Knowledge-Based Work in the 21st Century Organization’, October [Online]. Available at: mitsloan.mit.edu/50th/pdf/beyondtheorypaper.pdf (Accessed: 21 July 2013).
32. Lerner, A. (2011) ‘McGregor’s legacy: thoughts on what he left, what transpired, and what remains to pursue’, Journal of Management History, 17 (2), pp. 217-237 JSTOR [Online]. Available at: http://emeraldinsight.com/1751-1348.htm (Accessed: 1 July 2013)
33. LOUART P. “Maslow and Herzberg, theories of motivational content”, CLAREE, IAE-USTL, 2002, p.3

34. Maslow, A. H. (1954). Motivation and personality. New York: Harper.
35. Maslow, A.H. (2000). In Stephens, D.C, (Eds.). The Maslow business reader: New York: John Wiley & Sons, Inc.
36. McClelland, D. C., & Boyatzis, R. E. (1982). Leadership motive pattern and long-term success in management. Journal of Applied Psychology, 67, 737–743.
37. McClelland, D. C., & Burnham, D. H. (1976). Power is the great motivator. Harvard Business Review, 25, 159–166.
38. Miner John B, Organizational Behavior, Essential Theories of Motivation and Leadership, Prentice Hall of India, New Delhi, 2006, p. 97
39. References
40. Scheuer, S. (2000). Social and Economic Motivation at Work. Copenhagen: Copenha-gen Business School press.
41. Sole, Juan, 2007, “Introducing Islamic Banks into Conventional Banking Systems,” IMF Working Paper 07/175 (Washington: International Monetary Fund).
42. Sorensen, P.F., Minihan, M. (2011) ‘McGregor’s legacy: the evolution and current application of Theory Y management’, Journal of Management History, 17 (2), pp. 178-192 JSTOR [Online]. Available at: http://emeraldinsight.com/1751-1348.htm (Accessed: 1 July 2013).
43. Tahir, I., and S. Haron, (2010), “Cost and profit efficiency of Islamic banks: International Evidence using the Stochastic Frontier Approach,” Banks and Banks Systems, No. 5 Vol. 4, pp. 78–83
44. Zaman, A., (2010). On Islamic Economic. Published in The Express Tribune, June 10th.