AN ANALYSIS OF COMPARISON BETWEEN INTEREST BEARING SYSTEM IN THE CONVENTIONAL BANK AND PROFIT-SHARING SYSTEM IN THE ISLAMIC BANK

Abstract

ABSTRACT

The development of the banking world and the controversy among members of the communityregarding the interest bearing system which was considered usury, a regulation allowing banking operationsbased on Islamic principles that did not apply interestbut used a profit-sharing system instead was issued. The comparison between the interest bearing system at the conventional bank and profit-sharing system at Islamic bank is that the conventional bank determines the interest at a certain rate and has set it from the beginning, while in the Islamic Bank the ratio of profit sharing depends on the financing provided by the company,if the income on financing provided by the company increases, then the ratio also increases, and vice versa so that the amountis not always the same for different periods of time. In addition to the different system of calculation,the interest rate and profit-sharing especially the deposit products is also different. Bank Mandiri as a conventional bankcalculated the interest system using simple interest method,while the Bank Syariah Mandiri as an Islamic Bank calculated profit sharing using a percentage ratio called nisbah.

Seen from the aspect of partnership and unity as well as Islamic values(sharia), the Islamic bank provides more realisticoptioncompared to conventional bank. Whereas for those who expect a return that is certain for each periodcan use Conventional Bank, because the interest rate of the Conventional Bankis not affected by the revenuesof the company.

Keywords:    Interest Bearing System, Conventional Bank, Profit-Sharing System, Islamic Bank