ISLAMIC BANK ACCOUNTS

Having given a brief introduction on the concept of Islamic Banking, let us now discuss the Islamic bank accounts. There are three main categories of accounts, namely Islamic current account, Islamic savings account and Islamic investment account.

(1 ISLAMIC CURRENT ACCOUNT: An Islamic current account guarantees the depositor's principal amount. Account holders are not entitled to earnings, but they are also not entitled to losses. This account is specifically designed to fulfil the needs of consumers who want to deposit or withdraw funds via checks, cash tellers at bank branches, or ATM machines.

The Islamic current account is built around the wadia or Qard contract. In the legal sense, wadia denotes something entrusted to the care of another. The owner of the item is known as Mudi (depositor), the person entrusted with it is known as 'Wadi' or Mustawda (custodian), and the deposited asset is known as Wadia. A depositor has entered into a Wadiah contract by depositing money with a bank for safe keeping. In this situation, the bank will agree to be accountable for any loss to the deposited item as a custodian. This is required to allow them to use the funds for investment and financing purposes. A Qard contract is a depositor's interest-free loan to the bank. In this instance, the bank may use the funds lent by the customer as a creditor, but the bank is required to restore the principal on demand or as specified in the contract.

    ISLAMIC SAVINGS ACCOUNT: Depositors are offered Islamic Savings accounts largely to fulfil their preventive objectives for holding money, as well as to meet some of their transactional and investing demands where applicable. Savings accounts are specifically created to satisfy the needs and requirements of consumers who authorise the bank to invest the money they deposit. Customers can deposit monies at any time and withdraw them on a regular basis. Actual profits are distributed monthly at the bank's advertised ratio. 

     Mudaraba (profit sharing) contracts could help with this. Mudaraba is a profit-making partnership in which one party gives capital (rab-al-maal) and the other party offers labour (mudarib). In this contract, the depositors behave as rab-al-maal and the bank as mudarib. As a result, a percentage of the deposits would be invested in various initiatives, with profits split in accordance with the agreement. In the event of a loss, the rab-al-maal, or depositors, would shoulder all losses.

(3 ISLAMIC INVESTMENT ACCOUNT: Islamic investment accounts can be used as a substitute for conventional fixed-term deposits. This account allows customers to deposit particular amounts of money with the bank throughout the year for specific periods of time (one month, three months, six months, nine months, or twelve months) with the ability to take earnings at specific dates. It also allows banks to hold some money for depositors and invest it based on a pre-agreed-upon deposit tenure. Mudaraba and Wakala contracts are used to structure Islamic investment accounts.

A Mudaraba is a profit-making partnership in which one party gives capital (rab-al-maal) and the other party offers labour (mudarib). In this contract, the depositors behave as rab-al-maal and the bank as mudarib. As a result, a percentage of the deposits are invested in various initiatives, and profits are split in agreed-upon ratios. If a loss occurs, the rab-al-mall, i.e. the depositors, will shoulder all losses.

Wakala literally translates to "agency". Wakala is legally defined as the delegation of one person (the principal) to another (the agent) to take their place in a known and lawful transaction. In this regard, the agent (wakil) deals in other people's properties and preserves them in exchange for a fee known as wakala fee.

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