Comparison of Islamic and Conventional Banks IntroductionThe rapid growth of Islamic financial institutions across borders and continents is a testimony to the vibrant nature of Islamic banking. It is based on Sharīah-compliant financial and business principles. Such practices have their roots in the fundamental philosophy of Islamic banking and finance, which is firmly rooted in the Quran and Sunnah, transcends faith-based rituals, and is now widely accepted as a substitute for the established banking system. In particular, Islamic banking offers an attractive alternative to conventional debt financing as the morality of the conventional method has begun to be questioned (Hasan KM, Kayed NR, and Oseni AU 2003: Chapter 1). A main feature of Islamic finance is especially where it ensures that the financial needs of Muslims are rightly met by placing emphasis on risk sharing rather than transferring risks to the weaker party. This research paper aims to highlight the parallels, or even disparities between the assets and liabilities of an Islamic and a conservative bank.Literature ReviewMethodologyStudy- Comparison of systems between Islamic and conventional banksThe Islamic financial system is not just limited to banks , but also extends to financial instruments, financial markets and all other types of financial mediation, all of which must adhere to the principles of Islam. Contracts of “Islamic banks” or “Islamic financial institutions” comply with legal requirements Islamic as well as state requirements (El-Gamal, MA 2000: Chapter 2). According to Islamic law, the three main things that have been prohibited are Riba, Gharar and Maysir. While the Koran... in the middle of the paper... from the offers of both Islamic banks and conventional banks. For example, demand deposits and leasing contracts still carry a high level of risk when it comes to sharing with Islamic banks. Transaction costs and agency problems between savers and entrepreneurs constitute the rise of banks, as banks can help economize transaction costs and also mitigate agency conflicts. The agency-related problems faced by banks come from both sides of the balance sheet where they invest money in loans and other few assets from depositors and also where the bank has to act efficiently as an agent of the depositors, and from the assets side, where borrowers use resources provided by depositors for investment purposes. The debt contract