| The crux of the Islamic economic system is the sharing of profits and losses. All the liabilities and assets in the balance sheet are risk capital. In good times the depositors and the shareholders share the profits and in bad times they share the losses.In the conventional banking system the value of deposits is guaranteed by the bank plus there is a guarantee of the payment of interest. Any economic shock or a business downturn adversely affects the quality and value of the assets of the conventional bank leading possibly to negative net worth of the bank. This case examines how exposure to non-performing loans affects both Islamic and conventional banks. |
