Suppose a person wants to get financing for laptop. Cost of that specific model of laptop is 100,000 Rs. Below are the two financing options available for him being offered by both conventional and Islamic Bank.

Conventional Bank Islamic Bank
Product Name

Duration Personal Loan Murabaha Financing
1 year financing Amount repayable in installments=110,000

Amount repayable in installments=110,000

2 years financing Amount repayable in installments=120,000

Amount repayable in installments=120,000

3 years financing Amount repayable in installments=130,000

Amount repayable in installments=130,000

Consider the above tabled comparison of Conventional Bank and Islamic Bank’s Financing, answer the following questions.

a. If the amounts repayable by both the banks are same then what is the difference between the financing of both banks? Why do Islamic banks consider this extra amount as permissible?

b. Quran prohibits charging extra amount on giving extra time. i.e., Increasing the principal amount as the time of repayment increases). Here, both the conventional and Islamic banks are charging increased amounts as the duration increases. Are they both same or different? Provide proper reason for your answer.