Table of Contents
Overview of Deposit Categories
Three Main Types of Deposits
The document introduces three primary categories of deposit products offered
by Islamic Banks.
1. Transactional Deposits
- Purpose: These are used for day-to-day banking needs (like payments and withdrawals).
- Structure: They consist of a specific Product paired with a specific underlying Shariah Contract.
- Note: Later sections identify these as Current Accounts and Savings Accounts using contracts like Wadiah (Safe Custody).
2. Investment Deposits
- Purpose: These are used for customers who want to grow their money/earn returns.
- Structure: Like transactional deposits, these are defined by a specific Product and a Shariah Contract.
- Note: Later sections identify these as General Investment Accounts (GIA) using contracts like Mudarabah (Profit Sharing).
3. Money Market Deposits
- Purpose: Typically for large-scale or wholesale placements (often between banks).
- Structure: Defined by a Product and Contract.
- Note: Later sections link this to Commodity Murabahah (Tawarruq).
Summary Table
| Deposit Category | Key Components |
|---|---|
| Transactional | Product + Contract |
| Investment | Product + Contract |
| Money Market | Product + Contract |
Current Accounts-i
Two Main Types of Current Accounts
Islamic banks offer two versions of Current Accounts, defined by the contract
used:
- Wadiah Yad Dhamanah: This is based on "Guaranteed Custody" (the bank keeps your money safe).
- Mudarabah Current Account-i: This is based on "Profit Sharing" (the bank invests your money to share profits).
How it Works (The Mechanism)
The process follows a simple 4-step flow:
- Receive: The Islamic bank receives money from depositors.
- Invest: The bank invests that money into Shariah-compliant projects.
- Earn: The bank receives income/returns from those investments.
- Distribute: The bank pays the depositor:
For Wadiah accounts: It is a discretionary "Hibah" (Gift).
For Mudarabah accounts: It is a return based on the profit-sharing
agreement.
Key Roles in the Relationship
- The Depositor: Provides the Money.
- The Islamic Bank: Acts as the Entrepreneur who Invests the funds.
Wadiah Dhamanah Deposits
What is Wadiah Dhamanah?
This is a "Guaranteed Safe Custody" account.
Role of the Bank: The bank acts as a custodian to keep your money safe.
The Guarantee: The bank guarantees that you can withdraw your full
capital (you won't lose your principal money).
Bank's Rights: By depositing, you allow the bank to use your funds for
their financing operations.
Fees: There are no fees charged for this safe-keeping service.
Do You Get Profit? (The "Hibah" / Gift)
- No Fixed Return: The bank does not promise a fixed return on these deposits.
- Voluntary Gift: The bank may give you extra money as a "Hibah" (Gift).
- Important Rule: This gift is voluntary (not a contract) and is not fixed upfront.
How to Calculate the Gift (Hibah)
Even though it's a gift, banks use a formula to determine the amount based on
a "Hibah Rate" (HR).
The Formula:
Hibah = P x T x HR
P (Principal): Your account balance.
T (Time): Number of days ÷ 365 day
HR (Hibah Rate): The rate determined by the bank (usually based on the
previous month)
Mudarabah Current Account-i
What is Mudarabah C/A-i?
This is a transaction account based on Profit Sharing.
Mechanism: It operates similarly to the Wadiah account (you deposit,
bank invests), but the return is calculated differently.
The Key Difference: Instead of a voluntary "gift," you earn a Dividend
based on an agreed profit rate.
How to Calculate the Profit (Dividend)
The bank calculates your share of the profits using a specific formula.
The Formula:
Dividend= P x T x DR
P (Principal): Your account balance (calculated at the end of the day or total
monthly balance).
T (Time): Number of days ÷ 365 days
DR (Dividend Rate): The quoted profit rate or indicative profit rate.
Saving Deposits
Three Types of Saving Accounts
There are three main versions of savings accounts, depending on the contract
used :
- Wadiah Yad Dhamanah (Guaranteed Custody)
- Mudarabah (Profit Sharing)
- Wakalah (Agency)
1. Wadiah & Mudarabah Savings (How they pay)
These work very similarly to the Current Accounts mentioned earlier.
- Wadiah Savings: The bank calculates a "Hibah" (gift) using the same formula as the Wadiah current account.
- Mudarabah Savings: The bank pays a "Dividend" based on a profit rate.
2. Wakalah Saving Account-i (The Agency Model)
This uses a specific structure called Wakalah (Agency).
Key Roles:
- Customer: Acts as the "Fund Trustee" (provides the money).
- Bank: Acts as the "Mudarib" (investor/entrepreneur).
How it Works:
- Agency Fee (Ujr): The bank charges a fee (Ujr) or commission for managing the service.
- Rewards: The bank gives "gifts" to the customer as a token of appreciation for allowing the bank to use their deposit.
- Investment: The bank uses the funds for business activities. If there is a profit from this joint venture, it is shared between the bank and the customer.
Investment Deposits
1. Al-Mudarabah Investment (The Concept)
This is a risk-sharing investment account based on the Mudarabah (Trustee
Partnership) principle.
No Guarantees: Unlike savings accounts, there is no guarantee on the
deposit amount and no guarantee on fixed returns.
The Roles:
- Depositors (Rabulmal): Provide the Capital
- Bank (Mudarib): Acts as the Entrepreneur/Manager who provides value-added skills.
2. Profit & Loss Rules (PLS)
Because this is an investment, both profits and losses are treated
differently:
- Profits: If the project makes money, it is distributed between the bank and the depositor according to a pre-agreed Profit Sharing Ratio (PLS).
- Losses: If the project loses money, the loss is borne by the Depositor (Capital Depreciation). The bank loses its time and effort (value added is not compensated).
3. General Investment Account-i (GIA-i)
This is a specific product where the bank invests funds into high-yielding,
Shariah-compliant avenues.
Mechanism: The customer provides funds, and the bank manages the
investment.
Sharing: Profits are shared based on the pre-agreed ratio.
4. How to Calculate Investment ProfitThe formula used for GIA-i is
slightly different because it often looks at months (T) and percentage rates.
The formula:
P: Amount of deposit.
T: Period in months.
DR: Profit rate quoted.
(Note: Dividing by 1200 handles the conversion of months to years and the
percentage rate).
Commodity Murabahah Deposits (Tawarruq)
1. What is Tawarruq (Commodity Murabahah)?
This concept is used when someone needs cash (liquidity). It involves buying
something on credit and selling it for cash.
- Classical Tawarruq: A person buys a commodity from a seller on deferred payment (pay later) and sells it to a third party for cash.
- Organized Tawarruq: The bank manages this process. The bank acts as an agent to sell the commodity for the customer so the customer gets the cash easily.
2. How the Process Works (Step-by-Step)
In an organized setting (like a bank deposit or financing):
- Buy: The Customer buys a commodity from the Bank at a selling price (which includes profit) to be paid later.
- Sell: The Bank sells that same commodity to a Third Party on behalf of the customer at the current market price.
- Cash: The Third Party pays cash, and the Bank delivers this cash to the Customer.
- Result: The customer now has cash but owes the bank the deferred payment amount.
3. Interbank Deposits (Banks Lending to Banks)
This structure is often used between banks to manage large deposits.
- Deposit-Placing Bank (DPB): The bank with extra money (Investor).
- Deposit-Taking Bank (DTB): The bank that needs money (Borrower).
The Flow:
- DPB buys a commodity (e.g., CPO - Crude Palm Oil) from a supplier.
- DPB sells the commodity to DTB for a higher price (cost + profit) to be paid later.
- DTB sells the commodity to a Supplier to get immediate cash.
Outcome: DTB gets the cash it needs, and DPB holds a "deposit" (the
debt owed by DTB).
4. Fees & Calculations
When calculating the net amount received, certain fees apply.
Agent’s Fee (AF): A percentage charged by the agent (e.g., 25 basis
points).
Broker’s Fee (BF): A flat fee per transaction amount (e.g., $50 per $1
million).
Calculation Example:
Deposit Amount: $20 million
Agent Fee:
20m x 0.025% = 5000
Broker fee:
50 x 20 = 1000
Real-World Application (Financing)
- CIMB buys CPO (commodity) from a supplier.
- CIMB sells the CPO to the Client on a deferred payment basis (Cost + Profit).
- The Client appoints CIMB as an agent to sell the CPO to a third party for spot cash
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