Given the competition with the conventional finance industry, Islamic financial Institutions (IFIs) offer competitive prices of their services including financing, globally based on the premise that customers should come to them based not on religious compulsion but genuine conviction. Thus return to depositors and/or charge to users of funds is almost equal in both streams of banking. Hence if we compare Islamic finance with conventional finance based upon the outcome [returns] of the transaction, we can reasonably conclude that there is no substantial difference between Islamic and conventional finance. This is the reason for widespread misperceptions about Islamic finance even in Muslim societies.

1.3 Aims and Objectives

According to Sharia, fair play is required and no specific rate of profit is settled. It is the process of transactions through financial contracts which differentiate Islamic finance from conventional finance. Hence this study is an attempt to understand the mechanism of the Islamic financial system and document the similarities and differences with the conventional financial system. This study documents the products (modes) used by Islamic Financial Institutions (IFIs) and conventional banks in their operations including deposit collection, servicing and provision of financing facilities, investments etc.

Therefore, the objectives of this study will be as follows:

• To analyse the different behaviours towards Islamic banks