Shariah Principles of Deposit Mobilization Introduction Mobilization of deposit is one of the main function of banking business and also an important source of working fund for the bank Mobilization of deposits for a Bank is essential as oxygen for human being and also deposit is the LIFE BLOOD of a bank A major portion of investable fund of a bank comes from deposit A bank earns an average 70-75% of its gross income by investing depositors money Moreover, size and place of banks are determined on the basis of volume of their deposit So, the main function of Islamic banks is to mobilize deposits from the savings of individuals and to make these deposits available for investment ensuring production and distribution for the establishment of equity, justice and welfare in the society Allah, the almighty says in the Holy Quran ◌ۗ ُ‫ﻓ َﺈ ِنْ أ َﻣِ َﻦ ﺑ َ ْﻌﻀُﻜُﻢ ﺑ َ ْﻌﻀًﺎ ﻓ َْﻠﯿُﺆَ ِد ّ اﻟ ﱠ ﺬِي اؤْ ﺗ ُﻤِ َﻦ أ َﻣَ ﺎﻧَﺘَﮫُ َ ْوﻟﯿ َﺘ ﱠﻖِ ا ﱠ َ رَ ﺑﱠﮫ‬ “And if one of you deposit a thing on trust with another let the trustee (faithfully) discharge his trust, and let him fear his lord (Sura Al Baqarah: 283) A_ât hw` Zvgv`i gaă _K Kvb eăw Abăi Ici wbfâi Ki Zvi mv_ Kvb KvR Kvievi K‡i Zvn‡j hvi Ici wbf©i Kiv n‡q‡Q †m †hb Zvi AvgvbZ h_vh_i“‡c Av`vq K‡i Ges wb‡Ri ie Avjvn&‡K fq K‡i| َ ‫ﺼﺪﱡونَ ﻋَﻦ ﺳَﺒ ِﯿﻞِ ا ﱠ ِ ۗ◌ َواﻟ ﱠ ﺬِﯾ َﻦ ﯾ َﻜْ ﻨ ِﺰُ ونَ اﻟﺬ ﱠھَﺐَ َو ْاﻟ ِﻔﻀﱠﺔ‬ ُ َ ‫ﱠﺎس ﺑ ِﺎﻟ ْ ﺒ َﺎطِ ﻞِ َوﯾ‬ ِ ‫َﻣْﻮا َل اﻟﻨ‬ َ ‫َﺎن ﻟ َﯿ َﺄ ْﻛُﻠ ُﻮ َن أ‬ ِ ‫اﻷّﻦََﺣْ ﺒ َِﺎر َواﻟﺮﱡ ْھﺒ‬ ‫ﯾ َﺎ أ َ ﯾﱡﮭَﺎ اﻟ ﱠ ﺬِﯾﻦَ آﻣَ ﻨ ُﻮا إ ِنﱠ َﻛﺜ ِ ﯿﺮً ا ْ ِﻣ‬ ٍ‫ب أ َ ﻟِﯿﻢ‬ ٍ ‫َو َﻻ ﯾُﻨﻔِﻘ ُﻮﻧَﮭَ ﺎ ﻓ ِﻲ ﺳَﺒ ِﯿﻞِ ا ﱠ ِ ﻓ َﺒ َ ِﺸ ّﺮْ ھُﻢ ﺑ ِﻌ َﺬ َا‬ “O you who have believed, indeed many of the scholars and the monks devour the wealth of people unjustly and avert [them] from the way of Allah And those who hoard gold and silver and spend it not in the way of Allah - give them tidings of a painful punishment.” [Sura At Tawbah : 34] A_©t †n Cgvb`viMY! G Avn‡j wKZve‡`i AwaKvsk Av‡jg I `i‡e‡ki Ae¯’v n‡”Q GB h, Zviv gvbyli ab mÔỳ` Abăvq cìwZZ Lvq Ges Zv`iK Avjvni c_ †_‡K wdwi‡q iv‡L| hviv †mvbv I iƒcv Rgv Ki ivL Ges Zv Avjvni c_ eăq Ki bv Zv`iK hš¿Yvgq Avhv‡ei myLei `vI| ‫َﻣْﻮاﻟ َﻜ ُﻢُ اﻟ ﱠ ﺘ ِﻲ ﺟَﻌ َ َﻞ ا ﱠ ُ ﻟ َﻜ ُﻢْ ﻗ ِﯿ َﺎﻣًﺎ َوارْ زُ ﻗ ُﻮھُﻢْ ﻓ ِﯿﮭَﺎ َواﻛْ ﺴُﻮھ ُﻢْ َوﻗ ُﻮﻟ ُﻮا ﻟ َﮭُﻢْ ﻗ َْﻮ ًﻻ ﻣﱠ ﻌْﺮُ وﻓ ًﺎ‬ َ ‫َو َﻻ ﺗ ُﺆْ ﺗ ُﻮا اﻟَﮭَﺴﺎءَﱡﻔ أ‬ “And not give to the foolish your property, which Allah has made a means of sustenance for you, but provide for them with it and clothe them and speak to them words of appropriate kindness.” [Sura An Nisa: 5] A_ât Avi Zvgv`i h ab mÔỳ`K Avjvn& Zvgv`i Rxeb aviYi gvaăg cwiYZ KiQb, Zv wbevâa`i nvZ Zzj w`qvbv Ze Zv`i LvIqv civi eăev Kiv Ges m`yc`k `vI| In Addition, in case of mobilizing deposits Islamic bankers have to be very much careful:  To provide the interest-free banking facilities to the depositors with a view to make them safe from the curse of riba (interest)  To establish participatory banking relationship with clients instead of debtor-creditor relationship The resulting relationship that exists between the customers and the Islamic banks is one of a depositor and a depository  To accept deposits on the basis of Shariah stipulation of Al-wadi’ah and Mudarabah principles which have been permitted in the Islamic Shariah  To establish trust financing oriented banking system and take it as worship (Ibadat)  To extend co-operation to the low-income group of people of the society for their economic upliftment by opening deposit accounts with the small amount of initial deposit  To contribute in achieving the capital formation goal of the economy Basis of Shariah Islamic Banks mobilize its deposits through two principles of Shariah  Al-Wadeeah Principle  Mudarabah Principle Al-Wadeeah Principle  Wadeeah – Literally it means deposit Legally, it is a contract by which a person leaves his property for safe protection to another person and through Wadeeah a person empowers someone else to keep and protect his property  The word ‘Al-Wadeeah’ has been derived from Arabic word ‘Wada’yun’ which means ‘to keep/to deposit/to give up/Amanat  As per Shariah, Amanat means to keep something (goods/money/others) to any reliable person/institution for safe and secured preservation of the same keeping its ownership unchanged and which will be returned to the owner of the fund on demand as it in original shape  In case of Amanat, Bank/any other person/institution can not use, invest and amalgamate the funds of Amanat with the banks/his/its/other funds without prior permission of the owner of the Amanat  But the concept of Al-Wadeeah indicates to some extend addition of the concept of Amanat, in which there is a provision to obtain prior permission from the owner of the fund to use, invest, amalgamate the said fund with their/other funds and return the same within banking hour on demand  Bank is here ‘Muaddah Elaihe’, depositor is ‘Muaddi’, and money/goods are ‘Muaddah’ In Islamic banks, it receives money from the depositors with the condition to return the same on demand With depositors permission, the Bank can use/invest the money without paying benefit for this deposits though the Banks have right to realize charges from the client for safe keeping of the money or for services it rendered Characteristics of AWCA (Al-Wadeeah Current Account)  This A/c is fully governed by “Al-Wadeeah” Principle under Islamic Shariah  The depositors can deposit any amount in this account  The depositor can with draw any amount  No profit is allowed in this account  The depositors shall also not bear any loss  Cheques, bills etc are collected in this account against commission  Govt excise, incidental charges etc are realized from this account as per rule Mudaraba Principle  Meaning: The word ‘Mudaraba’ has been derived from Arabic word ‘Darb’/’Darbun’ which means “Travel” Literally, it means movement to earn Rahmat (Munafa) of Allah (Al-Qur’an 73:20) Thus the word Mudaraba means travel for undertaking business  Definition: “Mudaraba is a partnership in profit whereby one party provides capital and other party provides skill and labour The provider of capital is called “Shahib-al-Mal” or ”Rabb-ul-Mal (owner of the fund) while the provider of skill and labour is called “Mudarib” (Organizer/Manager)  As per definition of Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI), Mudaraba is a partnership in profit whereby one party provides capital (rab-al-maal) and the other party provides labour (Mudarib)  So, Mudaraba may be defined as a contract of partnership where the “Shahib-al-Mal” provides capital to the Mudarib for investing it in a commercial enterprise by applying his labour and endeavor  Both the parties share the profit as per pre-agreed ratio and the losses, if any, being borne by the provider of funds i.e “Shahib-al-Mal” except if it is due to breach of trust i.e misconduct, negligence or violation of the conditions agreed upon by the Mudarib If there is any loss incurred due to the reasons mentioned above, the Mudarib becomes liable for that Characteristics of MSA (Mudaraba Savings Account)  Total profit resulting from such investments will be distributed between the Bank and the depositor as per agreed ratio  Normally individuals, Society, Club, Mosque Committee open such kind of Account We not encourage to open the Account in the name of business concern, Limited Company etc  Opening of more than one Account in the name of same person is not allowed normally Profit / loss will be calculated on monthly product basis  .. .In Addition, in case of mobilizing deposits Islamic bankers have to be very much careful:  To provide the interest-free banking facilities to the depositors with a view... of initial deposit  To contribute in achieving the capital formation goal of the economy Basis of Shariah Islamic Banks mobilize its deposits through two principles of Shariah  Al-Wadeeah Principle... “Al-Wadeeah” Principle under Islamic Shariah  The depositors can deposit any amount in this account  The depositor can with draw any amount  No profit is allowed in this account  The depositors