Islamic Bank: How It Differs from a Conventional Bank

An Islamic bank operates on the same basic functions as a conventional bank — accepting deposits, financing, payments, — but it does so based on principles that prohibit interest rates and require a real economic basis for each transaction.

Main difference: prohibition of riba (interest)

A conventional bank earns from the spread between deposit rates and loan rates. In Islamic finance, interest (riba) is prohibited: the bank cannot simply lend money for interest. Instead, schemes based on real assets or profit and risk sharing are used — for example, murabaha (the bank buys a product and sells it to the client with a markup rather than lending for interest) or mudaraba and musharaka (the bank and the client share the profit and loss from a joint project).

Risk sharing instead of guaranteed interest

In the classical model of an Islamic bank, the depositor's yield is not fixed in advance but depends on the bank's investments, meaning the depositor partially shares the risk rather than just receiving a guaranteed interest. In practice, many Islamic banks offer products that are close in predictability to conventional deposits, but the structure of the deal formally remains based on profit sharing, not interest.

Prohibition on financing certain sectors

An Islamic bank does not finance businesses related to alcohol, gambling, pork, and other activities prohibited in Islam. Compliance with these principles is overseen by the bank’s Sharia supervisory board.

How it relates to «Stock Broker»

«Stock Broker» is not an Islamic bank but a broker offering access to a catalog of halal stocks selected according to AAOIFI standards, and services of a certified AAOIFI Sharia expert on staff; the list of approved securities is reviewed quarterly. The separate service «halal brokerage account» is currently suspended — the current status should be checked in the app before opening an account.

The material is for informational purposes only and is not a religious ruling (fatwa) or individual investment advice. For questions on the compliance of specific products with Sharia norms, it is recommended to consult with a qualified Islamic scholar.