8/8/2019 Deposit Prducts FULL & FINAL (Edited)
1/22
How Depository ProductsHow Depository Productsfunctions in a Islamic Bankfunctions in a Islamic Bank
yPresented by:
yAtif Irshad
ySyed Rass Masood
yYasir Ahmed
y
Imran Sheikh
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
2/22
DepositsDeposits
Basic Concepts
The concept of Mudarbah.
Deposit Management in Islamic Bank
An Example
Q & A
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
3/22
Deposits : Basic ConceptDeposits : Basic Concept
A deposit accountis a current account,savings account
, or other type ofbank
account, at a banking institution that allowsmoney to be deposited and withdrawn by the
account holder.
Some banks charge a fee for this service,while others may pay the customer interest onthe funds deposited.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
4/22
Depository Products: TypesDepository Products: Types
Checking Accounts or Current Accounts
Saving Accounts
Time Accounts / Term Accounts
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
5/22
MudarbahMudarbah
Mudarbah is a partnership agreementinwhich one partyinvests while the other
manages the business.
The one who provides the capital is Rab-ul-Mal .
While the person who manages thebusiness is called Mudarib.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
6/22
MudarbahMudarbah
Itis necessary for the validity of Mudarbahthat the parties agree, right at the beginning,on a definite proportion of the actual profit to
which each one of them is entitled.
They can share profit at any ratio they agreeupon.
Some incentives may be given to Mudarib as
a bonus. Loss is borne by the Rab-ul-Mal .
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
7/22
Types ofMudarbahTypes ofMudarbah
There are two types of Mudarbah
Restricted Mudarbah
(Mudarbah-al-Muqayyadah)
Un-Restricted Mudarbah
(Mudarbah-al-Mutlaqa)
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
8/22
Restricted MudarbahRestricted Mudarbah(Mudarbah(Mudarbah--alal--Muqayyadah)Muqayyadah)
Rab-ul-Mal may specify a particularbusiness for the Mudarib.
Mudarib can invest that money only tothat particular Business.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
9/22
Unrestricted MudarbahUnrestricted Mudarbah(Mudarbah(Mudarbah--alal--Mutlaqa)Mutlaqa)
Rab-ul-Mal gives full freedom to Mudaribto undertake whatever business he
deems fit.
Mudarib is authorize to do anything
normally done any thing in the business.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
10/22
Restricted Mudarbah vsRestricted Mudarbah vsUnrestricted MudarbahUnrestricted Mudarbah
Based on the same concept Islamic Banks canhave restricted and unrestricted investmentaccounts.
In restricted accounts the investment holderimposes certain restrictions as to where, how,and for what purposes his funds are to beinvested.
In unrestricted accounts the investment holderimposes can not restrict as to where, how, andfor what purposes his funds are to be invested.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
11/22
Restricted Mudarbah vsRestricted Mudarbah vsUnrestricted MudarbahUnrestricted Mudarbah
Most bank have unrestricted Mudarbahagreement with their depositors.
Whereas, the profit sharing is based on amodel known as MUDARBAH MODEL
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
12/22
Mudarbah ModelMudarbah Model
1)Creation of Investment Pool.
2)Pool's relationship with the bank.
3)Profit Sharing between the Bank and thepool.
4)Profit sharing amongst the Depositors.
5)Loss Sharing amongst the Bank and the
pool.6)Sharing ofLoss amongst the Depositors.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
13/22
Creation of Investment Pool.Creation of Investment Pool.
The bank will create an investment pool.
The pool is invested in different productsand businesses which are in compliance
with Shariah.Suppose there are three categories in tenure
namely:
Three Months
Six Months
One Year
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
14/22
1) Creation of Investment Pool.1) Creation of Investment Pool.
Each depositor of the bank will deposit itsfunds in a specific category of funds ineach of the tenures
Three Months Rs. 4,000/-
Six Months Rs. 3,500/-
One Year Rs. 2,500/-
Total Rs. 10,000/-
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
15/22
1) Creation of Investment Pool.1) Creation of Investment Pool.
Upon investment, the customer will beassigned a specific weightage based oninvestment category. Continuing with our
previous e.g. lets assume that followingweightages are assigned to each investmentcategory.
Three Months 0.60
Six Months 0.70
One Year 1.00
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
16/22
1) Creation of Investment Pool.1) Creation of Investment Pool.
All the investment in the investment poolare partners in the pool with the abovementioned profit sharing weightages.
Weightage is a ratio for distribution ofProfits.
Weightages can only be amended at thebeginning of the month while the profit isdistributed at the end of Month.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
17/22
2) Pool's relationship with the2) Pool's relationship with thebank.bank.
Now the bank will enter into MudarbahAgreement with the Pool.
Under this agreement the pool will be theinvestor or Rab-ul-Mal and the bank will actas a Mudarib. Bank will undertake businesswith the funds provided by the pool and profit
earned would beshared between the part
ies
in an agreed ratio. Assume that the profitisequallyshared between the parties.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
18/22
3) Profit Sharing between the3) Profit Sharing between theBank and the pool.Bank and the pool.
The bank will conduct a business with thefund provided by the pool. Continuing withthe same e.g. the bank deploys that Rs.10,000/- for a period of One year and earns aprofit of Rs. 1,000/- at the end of1st Month.
The profit would be shared as follows:
Bank Rs. 500/-
Pool Rs. 500/-
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
19/22
4) Profit sharing amongst the4) Profit sharing amongst theDepositors.Depositors.
Rs. 500/- earned by the pool would bedistributed as per the weightage assigned atthe beginning of the month, as mentioned
above.
Tenures Deposit(Rs.)
Weightage WeightedAverage
Profit* Rate**
a b a*b=c
Three Rs. 4,000/- 0.60 Rs. 2,400/- Rs. 163/- 4.075%
Six Months Rs. 3,500/- 0.70 Rs. 2,450/- Rs. 167/- 4.76%
One Year Rs. 2,500/- 1.00 Rs. 2,500 Rs. 170/- 6.80%
Total Rs. 10,000/- Rs. 7,350/- Rs. 500/-
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
20/22
5) Loss Sharing amongst the Bank5) Loss Sharing amongst the Bankand the pool.and the pool.
According to the rules of Mudarbah, allfinancial losses are borne by the pool asRab-ul-Mal.
However in such cases, the bank will earnnothing and make a loss due to non-recovery of expenses incurred in thebusiness.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
21/22
6)Sharing of Loss amongst the6)Sharing of Loss amongst theDepositors.Depositors.
Loss attributable to the pool would bedistributed amongst the pool members
according to their investment ratio.
8/8/2019 Deposit Prducts FULL & FINAL (Edited)
22/22
Thank You............
Top Related