Wadiah, Wadiah Yad Dhamanah (Safe Custody / Safe Custody with Guarantee)
- The Bank undertakes to keep safe the customers deposit and return to them upon demand. The Bank has no obligation to pay profit / interest. Â A token return can be given based on discretion as a Gift.
Common Usage : Savings Account, Current Account
Mudharabah (Profit Sharing)
- The customer provides the fund (Raab Ul Maal) and the bank invest the funds (Mudharib).The Bank agrees to collect funds from customers, invest and share profits derived from the investment (if any) upon maturity of investment period. The customer does not get involved in the management of the investment. However, in a Restricted Mudharabah, the customer can indicate, before the investment is made, the channels for the investment.
- The Profit Sharing Ratio is agreed up-front e.g. 70 (customer portion) to 30 (Bank portion) and cannot be revised without prior consent. So, if the net profit from an investment is $100, the customer gets $70 while the Bank keeps $30.
- However, if the investment makes a loss, the customer may not have any returns and capital returned may be less than 100% as all the capital risks are with the customer. The bank will avoid this by placing some internal mechanism to ensure customers’ interest are protected.
Common Usage : General Investment Amount (FD), Savings Account, Current Account
Qardh / Qardhul Hassan (Loan / Interest Free i.e Benevolent Loan)
- The customer is granted a loan where no interest is charged, usually for a short period of time. Used to cover temporary excess in current accounts.
Common Usage : Temporary Overdraft, Savings Account, Current Account
