Islamic vs Conventional Banking

Although Islamic Banking has many products similar to those offered by Conventional Banking, the two entities differ conceptually.


  • 1. Conceptual Difference Between Islamic and Conventional CURRENT ACCOUNT

    Islamic Current Account:

    • Funds are invested in Shariah compliant-avenues
    • Cannot charge customer for not maintaining minimum balance since account is on Qard basis

    Conventional Current Account:

    • No Shariah based restriction on investment of funds
    • May charge customer for not maintaining minimum balance

    Difference on the Basis of Key Features

    Allied Islamic Current Account Current Account
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Current Account Current Account
    2 Product Type Current Current
    3 Underlying Islamic Mode(s) Qard Demand Deposit
    4 Acceptable Currency PKR PKR
    5 Minimum balance requirement No Rs 25,000/-
    6 Tenors (minimum and maximum) Checking Checking
    7 Profit calculation No No
    8 Periodicity of Profit distribution N/A N/A
    9 Target Customers Individuals, Businessmen Individuals, Businessmen
    10 Service charges leviable, if any No Yes (monthly service charges of Rs. 50 only if minimum monthly average balance falls below Rs. 25,000/-)
    11 Other salient features/services – Shari’ah compliant
    – Initial deposit Rs. 1000/-
    – No charges will be recovered at the time of closing the account
    – Initial deposit Rs. 1000/-
    – Charges will be recovered at the time of closing the account
    – Free of cost issuance of first cheque

  • 2. Conceptual Difference Between Islamic and Conventional CURRENT ACCOUNT

    Islamic Current Account:

    • Funds are invested in Shariah compliant-avenues
    • Cannot charge customer for not maintaining minimum balance since account is on Qard basis

    Conventional Current Account:

    • No Shariah based restriction on investment of funds
    • May charge customer for not maintaining minimum balance

    Difference on the Basis of Key Features

    Allied Islamic Basic Banking Account Allied Basic Banking Account
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Basic Banking Account Allied Basic Banking Account
    2 Product Type Current Current
    3 Underlying Islamic Mode(s) Qard Demand Deposit
    4 Acceptable Currency PKR PKR
    5 Minimum balance requirement No No
    6 Tenors (minimum and maximum) Checking Checking
    7 Profit calculation No No
    8 Periodicity of Profit distribution N/A N/A
    9 Target Customers Individuals, Businessmen Individuals, Businessmen
    10 Service charges leviable, if any No No
    11 Other salient features/services – Shari’ah compliant
    – No charges will be recovered at the time of closing the
    – At parent branch only, the customer will be allowed following facilities free of charge during a month or as approved by the Bank from time to time:
    i. Two (02) Cash Withdrawals
    ii. Two (02) Cash Deposits
    – At parent branch only, Rs.50 will be charged for every additional transaction of withdrawal/deposit or as approved by the Bank from time to time
    – Initial deposit Rs. 1000/-
    – Charges will be recovered at the time of closing the account – At parent branch only, the customer will be allowed following facilities free of charge during a month or as approved by the Bank from time to time:
    i. Two (02) Cash Withdrawals
    ii. Two (02) Cash Deposits
    – At parent branch only, Rs.50 will be charged for every additional transaction of withdrawal/deposit or as approved by the Bank from time to time

  • 3. Conceptual Difference Between Islamic and Conventional CURRENT ACCOUNT

    Islamic Current Account:

    • Funds are invested in Shariah compliant-avenues

    Conventional Current Account:

    • No Shariah based restriction on investment of funds

    Difference on the Basis of Key Features

    Allied Islamic Asaan Current Account Allied Asaan Current Account
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Aasan Current Account Allied Asaan Current Account
    2 Product Type Current Current
    3 Underlying Islamic Mode(s) Qard Demand Deposit
    4 Acceptable Currency PKR PKR
    5 Minimum balance requirement No No
    6 Tenors (minimum and maximum) Checking Checking
    7 Profit calculation No No
    8 Periodicity of Profit distribution N/A N/A
    9 Target Customers Low risk Customer especially unbanked/under banked segment of population Low risk Customer especially unbanked/under banked segment of population
    10 Service charges leviable, if any No No
    11 Other salient features/services – Shari’ah compliant – Initial deposit Rs. 100/-
    – No charges will be recovered at the time of closing the account
    – Transaction turnover (Debit & Credit each) Rs. 500,000/- per month -Free first cheque of 10 leaves
    – Free issuance of ATM/Debit Card
    – Free SMS banking
    – Initial deposit Rs. 100/-
    – Transaction turnover (Debit & Credit each) Rs. 500,000/- per month
    – Free first cheque of 10 leaves
    – Free issuance of ATM/Debit Card
    – Free SMS banking

  • 4. Conceptual Difference Between Islamic and Conventional CURRENT ACCOUNT

    Islamic Current Account:

    • Funds are invested in Shariah compliant-avenues
    • Cannot charge customer for not maintaining minimum balance since account is on Qard basis

    Conventional Current Account:

    • No Shariah based restriction on investment of funds
    • May charge customer for not maintaining minimum balance

    Difference on the Basis of Key Features

    Allied Islamic Current Account (FCY) Current Account (FCY)
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Current Account (FCY) Current Account (FCY)
    2 Product Type Current Current
    3 Underlying Islamic Mode(s) Qard Demand Deposit
    4 Acceptable Currency US Dollar, GB Pound , Euro US Dollar, GB Pound , Euro, JPY
    5 Minimum balance requirement No No
    6 Tenors (minimum and maximum) Checking Checking
    7 Profit calculation No No
    8 Periodicity of Profit distribution N/A  N/A
    9 Target Customers Individuals (in Single/Joint capacity), Sole Proprietorships, Partnership Concerns, Corporate clients  Individuals (in Single/Joint capacity), Sole Proprietorships, Partnership Concerns, Corporate clients
    10 Service charges leviable, if any No Yes, (monthly service charges of 2 units for US Dollar, GB Pound, Euro and 300 units for JPY only if minimum monthly average balance falls below 500 units of  US Dollar, GB Pound, Euro and 50,000 units of JPY.
    11 Other salient features/services – Shari’ah compliant
    – Initial deposit 100 units of respective currency
    – No charges will be recovered at the time of closing the account
    Charges will be recovered at the time of closing the account

  • 5. Conceptual Difference Between Islamic and Conventional SAVINGS ACCOUNT

    Islamic Savings Account:

    • Bank and account holder’s relationship is Mudaraba basis whereby depositor (Rab ul Maal) provides funds and Bank (Mudarib) invests funds in Shariah-compliant modes
    • Profit rates are not predetermined. Profit from mudaraba is distributed on pre-agreed ratio of weightages
    • Funds are invested in Shariah compliant-avenues
    • Loss is borne by depositor (Rab-ul-Maal) proportionate to their investments

    Conventional Savings Account:

    • Bank and account holder’s relationship is based on Debtor and Creditor
    • Mark-up is predetermined
    • No Shariah based restriction on investment of funds
    • Pays mark-up to account holders even if Bank incurs a loss

    Difference on the Basis of Key Features

    Allied Islamic Savings Account PLS Saving Accounts
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Savings Account PLS Savings Account
    2 Product Type Savings Savings
    3 Underlying Islamic Mode(s) Mudarabah Savings
    4 Acceptable Currency PKR PKR
    5 Minimum balance requirement No  No
    6 Tenors (minimum and maximum) Checking Checking
    7 Profit calculation Monthly average balance Monthly average balance
    8 Periodicity of Profit distribution Six monthly or as may be decided / declared from time to time at the discretion of the Bank Six monthly or as may be decided / declared from time to time at the discretion of the Bank
    9 Target Customers Individuals, Businessmen Individuals, Businessmen
    10 Service charges leviable, if any No Only exempted on salary Accounts of institutions under special arrangement with Allied Bank
    11 Other salient features/services – Shari’ah compliant
    – Initial deposit Rs. 100/-
    – No charges will be recovered at the time of closing the account
    – If monthly average balance of previous month is Rupees 2.500M or above (free in the account opening month irrespective of the balance) then certain facilities will be available free of charge for next month.
     – Initial deposit Rs. 100/-
    – No charges will be recovered at the time of closing the account
    – If monthly average balance of previous month is Rupees 2.500M or above (free in the account opening month irrespective of the balance) then certain facilities will be available free of charge for next month.

  • 6. Conceptual Difference Between Islamic and Conventional SAVINGS ACCOUNT

    Islamic Savings Account:

    • Bank and account holder’s relationship is Mudaraba basis whereby depositor (Rab ul Maal) provides funds and Bank (Mudarib) invests funds in Shariah-compliant modes
    • Funds are invested in Shariah compliant-avenues
    • Loss is borne by depositor (Rab-ul-Maal) proportionate to their investments

    Conventional Savings Account:

    • Bank and account holder’s relationship is based on Debtor and Creditor
    • Mark-up is predetermined
    • No Shariah based restriction on investment of funds
    • Pays mark-up to account holders even if Bank incurs a loss

    Difference on the Basis of Key Features

    Allied Islamic Anmol Plus Account
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Anmol Plus Account
    2 Product Type  Savings
    3 Underlying Islamic Mode(s) Mudarabah
    4 Acceptable Currency PKR
    5 Minimum balance requirement No
    6 Tenors (minimum and maximum) Checking
    7 Profit calculation Monthly average balance
    8 Periodicity of Profit distribution Monthly  –
    9 Target Customers Individuals
    10 Service charges leviable, if any No
    11 Other salient features/services  – Shari’ah compliant
    – Initial deposit Rs. 1000/-
    – No charges will be recovered at the time of closing the account
    – If daily minimum balance of previous month is Rupees 500,000 or above (free in the account opening month irrespective of the balance) then certain facilities will be available free of charge for next month.

  • 7. Conceptual Difference Between Islamic and Conventional SAVINGS ACCOUNT

    Islamic Savings Account:

    • Bank and account holder’s relationship is Mudaraba basis whereby depositor (Rab ul Maal) provides funds and Bank (Mudarib) invests funds in Shariah-compliant modes
    • Profit rates are not predetermined. Profit from mudaraba is distributed on pre-agreed ratio of weightages
    • Funds are invested in Shariah compliant avenues
    • Loss is borne by depositor (Rab-ul-Maal) proportionate to their investments

    Conventional Savings Account:

    • Bank and account holder’s relationship is based on Debtor and Creditor
    • Mark-up is predetermined
    • No Shariah based restriction on investment of funds
    • Pays mark-up to account holders even if Bank incurs a loss

    Difference on the Basis of Key Features

    Allied Islamic Business Plus Account Allied Business Account
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Business Plus Account Allied Business Account
    2 Product Type Savings Current
    3 Underlying Islamic Mode(s) Mudabarah Demand Deposit
    4 Acceptable Currency PKR PKR
    5 Minimum balance requirement No No
    6 Tenors (minimum and maximum) Checking Checking
    7 Profit calculation Monthly Average Balance No
    8 Periodicity of Profit distribution Six monthly N/A
    9 Target Customers Businessmen Businessmen
    10 Service charges leviable, if any No Yes (monthly service charges of Rs. 100/- only if minimum monthly average balance falls below Rs. 50,000/-
    11 Other salient features/services – Shari’ah compliant
    – Initial deposit Rs. 1000/-
    – No charges will be recovered at the time of closing the account
    – If monthly average balance of previous month is Rupees 25,000 or above (free in the account opening month irrespective of the balance) then certain facilities will be available free of charge for next month.
    – Initial deposit Rs. 1000/-
    – Charges will be recovered at the time of closing the account
    – Customers can avail following free benefits with NO monthly average balance requirements:
    – FREE Online Cash Deposit
    – FREE Intercity Clearing / OBC
    – FREE Online Cash Withdrawals
    – FREE First Cheque Book of 10 Leaves
    – FREE Online Account to Account Transfer
    – FREE Cheque / Instrument deposit for clearing / collection by Remote Branch
    – FREE Issuance / Cancellation / Duplicate Issuance of Demand Drafts / Allied Banker Cheque (Payable at any branch) / Pay Order / Allied Banker Cheque (Payable at Issuing branch) Call Deposit Receipt

  • 8. Conceptual Difference Between Islamic and Conventional SAVINGS ACCOUNT

    Islamic Savings Account:

    • Bank and account holder’s relationship is Mudaraba basis whereby depositor (Rab ul Maal) provides funds and Bank (Mudarib) invests funds in Shariah-compliant modes
    • Profit rates are not predetermined. Profit from mudaraba is distributed on pre-agreed ratio of weightages
    • Funds are invested in Shariah compliant avenues
    • Loss is borne by depositor (Rab-ul-Maal) proportionate to their investments

    Conventional Savings Account:

    • Bank and account holder’s relationship is based on Debtor and Creditor
    • Mark-up is predetermined
    • No Shariah based restriction on investment of funds
    • Pays mark-up to account holders even if Bank incurs a loss

    Difference on the Basis of Key Features

    Allied Islamic Sahulat Account
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Sahulat Account
    2 Product Type Savings
    3 Underlying Islamic Mode(s) Mudarabah  –
    4 Acceptable Currency PKR  –
    5 Minimum balance requirement No  –
    6 Tenors (minimum and maximum)  Checking  –
    7 Profit calculation Monthly average balance  –
    8 Periodicity of Profit distribution Six monthly  –
    9 Target Customers Individuals, Businessmen  –
    10 Service charges leviable, if any No  –
    11 Other salient features/services – Shari’ah compliant
    – Initial deposit Rs. 1000/-
    – No charges will be recovered at the time of closing the account
    – At parent branch only, the customer maintaining minimum balance (as approved by the Bank from time to time) in the account, will be allowed one free of charge Safe Deposit Locker as follows:
    Safe Deposit Lockers: Minimum Balance:
    Small Rs.40,000/-
    Medium Rs.70,000/-
    Large Rs.100,000/-
    Extra Large Rs.125,000/-
     –

  • 9. Conceptual Difference Between Islamic and Conventional SAVINGS ACCOUNT

    Islamic Savings Account:

    • Bank and account holder’s relationship is Mudaraba basis whereby depositor (Rab ul Maal) provides funds and Bank (Mudarib) invests funds in Shariah-compliant modes
    • Profit rates are not predetermined. Profit from mudaraba is distributed on pre-agreed ratio of weightages
    • Funds are invested in Shariah compliant avenues
    • Loss is borne by depositor (Rab-ul-Maal) proportionate to their investments

    Conventional Savings Account:

    • Bank and account holder’s relationship is based on Debtor and Creditor
    • Mark-up is predetermined
    • No Shariah based restriction on investment of funds
    • Pays mark-up to account holders even if Bank incurs a loss

    Difference on the Basis of Key Features

    Allied Islamic Khalis Munafa Account Platinum Rewarding Profit Account
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Khalis Munafa Account Platinum Rewarding Profit Account
    2 Product Type Saving Other (remunerative current account)
    3 Underlying Islamic Mode(s) Mudarabah Saving
    4 Acceptable Currency PKR PKR
    5 Minimum balance requirement No Rs. 100,000/-
    6 Tenors (minimum and maximum) Checking Checking
    7 Profit calculation Daily average balances Monthly average balances
    8 Periodicity of Profit distribution Monthly Monthly
    9 Target Customers Higher saving Customers Higher saving Customers
    10 Service charges leviable, if any No Yes, (monthly service charges of Rs. 50/- only if minimum monthly average balance falls below Rs. 10,000/-
    11 Other salient features/services – Shari’ah compliant
    – Tiers based profit calculation       – Initial deposit Rs. 1000/-
    – No charges will be recovered at the time of closing the account.
    – Profit calculation on the basis of average daily balances maintained during the month in different tiers as announced from time to time at the discretion of the Bank whereas the loss will be shared in proportion to the contributed funds utilized in any specific pool
    – Tiers based profit calculation
    – Initial deposit Rs. 100,000/-
    – Charges will be recovered at the time of closing the account.
    – Profit calculation on the basis of average daily balances maintained during the month in different tiers as announced from time to time at the discretion of the Bank.
    – PLS saving rate of 4% will be applicable for deposits below Rs. 100,000/-

  • 10. Conceptual Difference Between Islamic and Conventional SAVINGS ACCOUNT

    Islamic Savings Account:

    • Bank and account holder’s relationship is Mudaraba basis whereby depositor (Rab ul Maal) provides funds and Bank (Mudarib) invests funds in Shariah-compliant modes
    • Profit rates are not predetermined. Profit from mudaraba is distributed on pre-agreed ratio of weightages
    • Funds are invested in Shariah compliant avenues
    • Loss is borne by depositor (Rab-ul-Maal) proportionate to their investments

    Conventional Savings Account:

    • Bank and account holder’s relationship is based on Debtor and Creditor
    • Mark-up is predetermined
    • No Shariah based restriction on investment of funds
    • Pays mark-up to account holders even if Bank incurs a loss
    Allied Islamic Asaan Saving Account Allied Asaan Saving Account
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Asaan Saving Account Allied Islamic Asaan Saving Account
    2 Product Type Saving Saving
    3 Underlying Islamic Mode(s) Mudarabah Saving
    4 Acceptable Currency PKR PKR
    5 Minimum balance requirement  No No
    6 Tenors (minimum and maximum) Checking Checking
    7 Profit calculation Monthly Monthly
    8 Periodicity of Profit distribution Six monthly or as may be decided / declared from time to time at the discretion of the Bank Six monthly or as may be decided / declared from time to time at the discretion of the Bank
    9 Target Customers Low risk Customer especially unbanked/under banked segment of population. Low risk Customer especially unbanked/under banked segment of population.
    10 Service charges leviable, if any No No
    11 Other salient features/services – Shari’ah compliant
    – Initial deposit Rs. 100/-
    – Profit calculation on average balance of the month
    – No charges will be recovered at the time of closing the account. – Transaction turnover (Debit & Credit each) Rs. 500,000/- per month *Free first cheque of 10 leaves.
    – Free issuance of ATM/Debit Card *Free SMS banking
    – Initial deposit Rs. 100/-
    – Profit calculation on average balance of the month – Transaction turnover (Debit & Credit each) Rs. 500,000/- per month
    – Free first cheque of 10 leaves.
    – Free issuance of ATM/Debit Card
    – Free SMS banking

  • 11. Conceptual Difference Between Islamic and Conventional TERM DEPOSIT

    Islamic Investment Certificate (IIC):

    • Bank and account holder’s relationship is Mudaraba basis whereby depositor (Rab ul Maal) provides funds and Bank (Mudarib) invests funds in Shariah-compliant modes
    • Profit rates are not predetermined. Profit from mudaraba is distributed on pre-agreed ratio of weightages
    • Funds are invested in Shariah compliant avenues
    • Loss is borne by depositor (Rab-ul-Maal) proportionate to their investments

    Conventional Term Deposit:

    • Bank and account holder’s relationship is based on Debtor and Creditor
    • Mark-up is predetermined
    • No Shariah based restriction on investment of funds
    • Pays mark-up to account holders even if Bank incurs a loss
    Allied Islamic Investment Certificate Allied Term Plus Deposits
    Sr # Key Features Islamic Banking Conventional Banking
    1 Name of Product Allied Islamic Investment Certificate Allied Term Plus Deposits
    2 Product Type Term Term
    3 Underlying Islamic Mode(s) Mudarabah Saving
    4 Acceptable Currency PKR PKR
    5 Minimum balance requirement Rs. 25000/- Rs. 10,000/-
    6 Tenors (minimum and maximum) 1 month, 3 months, 6 months

    1 year, 2 years, 3 years, 4 years and 5 years

    1 month, 3 months, 6 months

    1 year, 3 years, 5 years and 10 years

    7 Profit calculation Yes Yes
    8 Periodicity of Profit distribution Monthly, Quarterly, Half Yearly or Maturity basis Monthly, Quarterly, Half Yearly or Maturity basis
    9 Target Customers Individuals, businessmen Individuals, businessmen
    10 Service charges leviable, if any No No
    11 Other salient features/services – Shari’ah compliant
    – Following options will be available at maturity of the certificate:
    i. Roll-over with Principal and Profit
    ii. Profit encashment (in linked current / saving account) and Principal Roll-over
    iii. Principal and Profit encashment at maturity (in linked current / saving account)
    – No premature charges or termination fees will be charged on any type of investment certificate
    – Auto Rollover option available at maturity on prevailing profit rates as per customer’s instructions.
    – In case of premature encashment, prevailing PLS Savings rate will apply for the completed days.
    – Customers are guaranteed a fixed return after a fixed period.