Theoretically, there are different types of financing system followed by different countries. These financing systems are aimed to help the borrower to generate the required funds. These systems also help the government of the country to perform their various economical activities, efficiently. The efficient management of various economic activities of a country such as construction of building, houses and other infrastructure, accomplishment of all the basic necessities of residents of that country like education, medical facilities, employment, etc, production, trading in international market, etc. is the indicators of the prosperity of the country.
.In theoretical aspects, the conventional loan is a sort of a traditional mortgage loan which is provided by banks, credits unions, financial institutions and local money lenders. The interest rate for these types of loans is set by money lenders as per their own terms and conditions. This interest rate is relatively high for taking maximum benefits in this type of financing system. There is need of high down payments and mortgage or security for these types of loan. There are several differences in the conventional.
.Where as Murahaba financing is also a kind of financing which is known as the ‘cost-plus financing’. This financing system is one of the most important systems prevailing in various Islamic countries. There is no additional interest is charged in this type of dealing (International Monetary Fund 2006).