Mudarabah
shall mean a form of partnership where one party (i.e. the Rabul
Mal) provides the funds while the other (i.e. the Mudarib) provides
expertise and management. Any profits accrued are shared between the two
parties on a pre-agreed Profit Sharing Ratio (PSR), while loss is borne
by the provider of the Fund (i.e the Rabul Mal). The
account can be generally classified in to two major groups which have
sub account types. These are Mudaraba Saving Accounts and Mudarabah
Deposit accounts.
Mudarabah Saving Accounts shall refer to saving accounts operated in line with Mudarabah principles. Mudarabah Deposits shall refer to all available list of Term Deposits, the contract of which is created in line with Mudarabah principles.
Key points to notice regarding these accounts
- The Bank maintain certain certain percentile of the monthly Net Income of a pool as Profit Equalizer Reserve (PER) which should not exceed 30% of the funds in the pool;
- The Bank also maintain some percentage of their profit for Investment Risk Reserve (IRR) (mostly up to 1%) of the profit available for distribution to customers;
- Customers have no any right to claim the share in PER and IRR (if any) after withdrawal of deposit;
- The Bank apply various rates of Profit Sharing Ratio (PSR) and weightages across the various types/tiers of Mudarabah Saving and Deposits Accounts;
- Profit is calculated based on Average Daily Balance;
- All savings and deposits shall be assigned under a single pool. Income derived from all financing and investment activities of the Bank shall be shared among all Mudarabah savings and deposits products in line with the approved PSR;
- The allocation of deposit to a pool shall be performed at the time of opening an account or creating a deposit contract;
- Mudarabah Saving and Deposit Accounts have minimum initial deposit amount set by each bank;
- Mostly, the amount of the minimum balance of Mudarabah Deposit Accounts are higher than Mudarabah Saving Accounts,
- Mudarabah deposit set for 3, 6, 12, 24 and more than 24 months
S.No.
|
Account or Deposit Type
|
Investment Period
|
PSR Ratio
| |
Bank
|
Customer(S)
| |||
1
|
Mudarabah Saving Accounts
|
Not Applicable
|
65
|
35
|
2
|
Mudarabah Deposits
|
3 months
|
60
|
40
|
6 months
|
55
|
45
| ||
12 months
|
50
|
50
| ||
24 months
|
45
|
55
|
How to Oppen Mudarabah Account (Saving and Deposits)
- Intiation to open the Mudarabah Account can come from the customer or the bank,
- The customer can request to open the account by filling the Standard Application Form and on submitting all other documents and information as may be requested by the Bank;
- Customer(s) shall be notified about the applicable PSR ratios on the standard application form;
- The Bank may provide Product Disclosure Sheet (PDS) to the Customer(s) at the time of application. The sheet shall contains information on the product features, benefit packages associated with a product, PD Procedure, applicable fees and charges, applicable provisions and reserves, risk issues;
- The applicable PER shall be displayed on the notice board of the Branches or on the Standard Application Form or through any other convenient means before start of the relevant period;
- Changes to PSR and Weightages (if any) will be communicated to the Customer through any of the available and convenient means, at the Bank’s disposal, including notice boards, mass media, websites, telephone calls etc. The Bank will provide a notice period of Eight days to Customers. If Customer(s) do not approach the Bank for withdrawal of funds or renewal of deposit contracts within the stated notice period, this is considered, under the term to be included in the Mudarabah contract signed by the depositor, as a tacit approval of the new PSR, and the new ratios shall be applied in the next profit distribution.
- Customer(s) shall sign contracts prepared for the respective Mudarabah Account or Deposits;
- Customer(s) shall make a deposit using the standard deposit formats of the banks.
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