TRAINING ON SIINQEE - IHSAN CUSTOMER

ACCOUNT AND OPERATION

Prepared by : Yesuf seyid
 Facilitator
Yesuf Seyid
Manager – Account and Finance (Siinqee ihsan)
+251 922-220-655
+251 912-138-004
yesufbdu2006@gmail.com
 Participants’ Introduction and
Ground rule

8. Arrive On Time
1.Name
2.Education background 9. Listen To Others
3.Current Position/Title 10 Participation from all trainee
4.Branch
11 Do Not Interrupts
5.Your most people admired strength
6.Put your Mobiles on Silent Mode 12 Avoid Absence
7.Share You Practical Experience 13 Class manager

14 Energizer team
Training Schedule

Start 8:30

Tea break 10:00

Lunch 12:00

Start 1:00

Tea break 3:00

Finish 4:00
 Training contents
Session one :Introduction and IFB definition Session five :Conventional Vs Islamic
bank(IFB)
Session two: Type of Riba
2.1 Rate for duration (riba al nasse’a) Session six :IFB banking models
2.2 excess exchange (al fadl) 6.1 Dedicated window
Session three :Historical background of IFB 6.2 Dedicated branch
6.3 subsidiary
Session four :Source of sharia law 6.4 Fully fledged
4.1 Al-quran
4.2 sunnah method
4.3 Ijma( consensus)
4.4 Qiyas (analogy)/comparison
 Training contents
Session Seven: Siinqee IHSAN (IFB) Deposit Session Nine: .Investment account
product
9.1 unrestricted investment acoount
7.1 wadia saving
9.1.1 Mudarabaha saving account
7.2 lel-shebab/wadia youth saving
9.1.2 Mudarabaha investment acc
7.3 lel- murhaqayin /wadia teen youth
9.1.3 Mudarabaha hybrid acc
7.4 lel tealim /wadia educaction
9.2 Restricted investment account
7.5 labbaik saving /haji /umra
9.2.1 Mudarabaha saving account
7.6 Amanah current account
9.2.2 Mudarabaha Investment account
Session eight : Source of fund and use of fund
Session Ten : IFB pool management
10.1 profit sharing distribution
10.2 profit equalizer reserve (PER)
10.3 investment risk reserve (IRR)
General objectives : The over all objectives of the training is
to enable participants become qualified worker(staff) on
siinqee –ihsan (IFB) by providing the required, knowledge,
skill and abilities
Specific Objective:- Participants will be able to understand:

• The documents we refer as a guideline to give siinqee –ihsan (IFB) branches and window service;
• Know Historical background of Interest Free Banking
• Appreciate the significance of IFB to the Banking industry and to the Economy at large
• Basic features & account maintenance of siinqee –ihsan (IFB) Deposit products
• How to identify impermissible funds and how to segregate them from siinqee –ihsan (IFB) funds;
• Appreciate the differences and similarities between conventional and Islamic banking
• Know major siinqee –ihsan (IFB) Products and Services
 cont…..

• Know the major types of Interest Free Banking Account/Sources of Funds/;

• Understand Siinqee IHSAN deposit products;
• Explain the concept and characteristics of Mudarabah
• Describe the handling of profit/loss distribution under Mudarabah
• Understand the distinctive principles & features of IFB Deposit products;
• Identify and describe types and features of IFB deposit products and other service
• How Profit is distributed between Bank and depositors?
• Reserves (Investment risk reserve & Profit equalization reserve)
• IFB Deposit products
 Session one:
Introduction and Definition IFB

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 Specific objectives
After completion of this session ,participants will able to :
• Define interest free banking
• Know Historical background of Interest Free Banking
• Appreciate the significance of IFB to the Banking
industry and to the Economy at large
• Define siinqee –IHSAN

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 • IFB is ‘A banking business in which mobilizing
or advancing of funds taken in a manner
consistent with Islamic Finance Principle and
mode of operation that avoids receiving or paying
interests’, NBE (SBB/72/2019).
• The basic principles underlying in IFB
transactions are banking or financing should not
involve an activity prohibited by Shari’ah
(Islamic law) and mainly that it must not
involve riba (the giving or receiving of interest).
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 • The general secretariat of the Organization of the
Islamic Conference, defines an Islamic bank as “a
financial institution whose statutes, rules, and
procedures expressly state its commitment to the
principle of Shari’ah and to the banning of the receipt
and payment of interest on any of its operations” (Ali
and Sarkar 1995, p. 22).

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 • The Central Bank Law of Kuwait (1968, as amended
in 2003) stipulates that Islamic banks “exercise the
activities pertaining to banking business and any
activities considered by the Law of Commerce or by
customary practice as banking activities in compliance
with the Islamic Shari’ah principles.”

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 • Interest Free banking is a deposit-taking banking institution
whose scope of activities includes all currently known
banking activities, excluding borrowing and lending on the
basis of interest.
• On the liabilities side, it mobilizes funds on the basis of
Mudarabah contract. It can also accept demand deposits
which are treated as interest-free loans from the clients to the
bank, and which are guaranteed.
• On the assets side, it advances funds on a profit-and-loss
sharing or debt-creating basis, in accordance with the
principles of Shariah.
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 • IFB is Religion based banking service
• IFB is Alternative to the conventional banking service, but
comply with Shari’ah Principle
• Interest technically denotes in a loan transaction in which any
increase or addition or extra is paid by the borrower as a
condition of loan, i.e., either promised by the borrower or
imposed by the lender on money,

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 • Similarly, in accepting money for deposit in specified or
unspecified period of time banks pay interest for the depositors
for the use of money, i.e., promised by the bank or imposed by
the depositors,

• Unlike conventional banking, IFBs are not allowed to charge

interest by lending money to their customers, because under
Shariah principle, making money out of money is strictly
prohibited.

• In Interest free financing principle, money is not considered as

a commodity and, therefore, cannot be “rented out” for a fee.

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 • Instead of charging interest on money lent, IFB
practices and financial transactions are primarily
based on trading real assets, leasing, partnership, etc.

• It rather promotes the sharing of risk and reward

between contracting parties (Bank and Customer),
the degree of sharing varies by contract.

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 What does “Siinqee –IHSAN ”
means

• Al-IHSAN is comprehensive concept which denotes Doing things Completely, Nicely

and in a tasteful manner.

IHSAN Comprises Four Components

1. Sincerity ( ikhlas)
2. Tastefulness (Doing things in a nice manner.
3. Completeness.(Doing things end – end)
4. Correctness (Doing things in aright way).
• When we saying “Siinqee - -IHSAN ” …..the Perfect Bank
• In islam IHSAN is the Muslim responsibility to obtain perfection or Excellence in
worship.
• A literal meaning of the name means Perfection, Excellence, Beatification, to do beautiful
things and Maximum purification of worship.
• It reflects/reminds the bank’s Name “Siinqee' which states the sign of fertility,
productivity and prosperity.”
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 Session Two :
What is RIBA?

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 Specific objectives
After completion of this session ,participants will able to :
•Describe the major components of riba
•Explain the difference between riba(interest) and profit
•Define riba (interest)
•Define profit

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 What is RIBA?
• Riba is Arabic word means “growth, increase, addition, expansion”
and denotes the payment or receipt of interest for the use of money.
• Technically, the meaning of riba involves an increase in the
principal, which is guaranteed in a loan transaction. So, any extra
charge over the original loan amount, as a contractual obligation, is
identified as riba and deemed forbidden in Islam.
• Riba is also believed to represent sure gain to the lender without
any possibility of loss as well as a reward in return for no work.

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 What is RIBA?
lRiba literally means increase, addition and growth
The following elements are apparent in a riba transaction:
1. Riba is an increase over the principal loan.
2. It is an excess that is payable as a contractual obligation in a
loan contract.
3. It is without consideration of risk, labour, capital, etc.
4. An increase is guaranteed to only one party.

• ally means increase, addition and growth

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 Two Common Types of Riba
Rate-for-duration (Riba Al Nassee’aa)
• Specified, predetermined repayment in excess of
loan/capital. (Fixed, Guaranteed, Increases with the
increase of time) E.g. Simple & Compound interest.

• Interest out of lending:- Extra amount of money either

imposed by the lender on the borrower, or promised by
the borrower at the time of the contract
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 Excess Exchanges (Riba Al Fadl)
• When specified items are exchanged for the same kind at
unequal measures or on deferred basis, this is Riba.
• "Gold for gold, silver for silver, wheat for wheat, barley for
barley, dates for dates, and salt for salt - like for like, equal for
equal, and hand-to-hand;
• If the commodities differ, then you may sell as you wish,
provided that the exchange is hand-to-hand” Whoever pays more
or takes more has indulged in riba.
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 Interest (Riba) Vs Profit
• Interest means giving and/or taking of any excess amount in
exchange of a loan or on debt.
• Muslim scholars of all the fiqhs that interest is Riba in all its
forms and manifestations.
1. consumption loan (loan for meeting day to day human
needs) or commercial loan (loan for business purpose).
2. Simple or compound
3. To/From Muslim and non-Muslim

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 Interest (Riba) Vs Profit
• Profit in a business venture is determined ex post—that is,
depending on the outcome of the venture but based on the
predetermined profit/loss ratios.
• On the other hand, interest, which is determined ex ante—
that is, predetermined regardless of the outcome of the
venture.
• Profit in a trade or a sale may be determined ex ante, but it
is based on trading real assets between contracting parties,
not lending of money on interest.

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 Think Point !
“All that we had borrowed up to 1985 or 1986 was around
$5 billion and we have paid about $16 billion yet we are
still being told that we owe about $28 billion. That $28
billion came about because of the injustice in the foreign
creditors' interest rates. If you ask me what is the worst
thing in the world, I will say it is compound interest.” So
$5 billion was borrowed and, fifteen years later, $44
billion was due (either paid or due to be paid) ! !
(President Obasanjo of Nigeria, G8 summit, Okinawa, 2000)

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 Session Three
History of IFB

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30
 Specific objectives
After completion of this session, participants will be able to :
• Know what IFB is
• Explain the historical background of interest free banking world
wide over view
• Describe the growth of IFB in ethiopian

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 History of IFB
• The pioneering effort, led by Ahmad Elnaggar (Ahmed Al
Nejjar), took the form of a savings bank based on profit-
sharing in the Egyptian town of Mit Ghamr in 1963. This
experiment lasted until 1967 by the time there were nine such
banks in the country.
• 1973 ( Philippines) Philippines Amanah Bank was established.
Designed to serve the special banking needs of the Muslim
community.
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 • On 1975, the Islamic Development Bank (IDB) was setup.
• 1978 (Luxembourg) Islamic Finance House was established.
• On 1979 (Bahrain) Bahrain Islamic Bank was established.
• The first Islamic bank in Malaysia was established in 1983.
• On 1993, commercial & merchant banks were allowed to
offer Islamic banking products and services under the Islamic
Banking Scheme (IBS).
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33
 • These institutions however, are required to separate the funds and
activities of Islamic banking transactions from that of the conventional
banking business.
• 1984 (Sudan) launches Islamic Banking
• Today (Western banks) Citibank, Merill Lynch, HSBC, UBS, Standard
Chartered Bank, the Royal Bank of Scotland, JPMorgan Chase, Barkley’s
offering Islamic Financial services. IB Britain, Lariba (America) were
established
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34
• Subsequently, ethical Banks and financial institutions, based on
Islamic principles, spread in countries where Muslims are minorities,
such as UK, Luxemburg, Denmark, Australia, India and the United
States.

• On the year 1991 (Bahrain) Recognizing the need for standards.

Accounting and Auditing organization for IFI AAOIFI was
established

• On the year 2002 (IFSB) was established. Sets and disseminates the
prudential and supervisory standards and core principles that are in
compliance of Shar’iah.
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9/15/2023 36
 Government Asia-Pacific Middle East Others
driven

Pakistan
Sudan
Iran
Malaysia

HIGH Bahrain
Kuwait

Qatar
Brunei

Indonesia
Singapore UK

Bangladesh

Oman
Sri Lanka
United Arab
Hong Kong Emirates
Saudi Arabia
Japan
LOW South Korea
USA Egypt Turkey
China

Market
driven

Note: Circle sizes denote estimated size of the Islamic financial market in these respective countries
9/15/2023 37
 IFB Industry Status
As of June 30, 2023

Number of Outstanding Financing to

Bank Name Customer Deposit Amount Financing Deposit Ratio
1 Abay 284,024 2,300,000,000.00 1,470,000,000.00 63.91
2 Abyssinia 1,541,000 18,070,000,000.00 4,500,000,000.00 24.90
3 Amhara 55,000 450,000,000.00 - 0.00
4 Awash 1,944,825 16,485,000,000.00 7,510,000,000.00 45.56
5 Buna 295,541 1,630,000,000.00 170,000,000.00 10.43
6 CBE 5,999,594 90,430,000,000.00 20,910,000,000.00 23.12
7 CBO 3,028,465 19,400,000,000.00 16,500,000,000.00 85.05
8 Dashen 721,000 8,120,000,000.00 5,120,000,000.00 63.05
9 Debub Global 96,426 180,000,000.00 42,000,000.00 23.33
10 Hibret 290,000 3,230,000,000.00 2,800,000,000.00 86.69
11 Hijra 294,787 5,000,000,000.00 2,950,000,000.00 59.00
12 NIB 443,503 4,500,000,000.00 1,400,000,000.00 31.11
13 Oromia 1,150,000 8,310,000,000.00 5,110,000,000.00 61.49
14 Tsehay 20,330 120,000,000.00 20,000,000.00 16.67
15 Shebelle 39,981 340,000,000.00 - 0.00
16 Siinqee 214,269 730,000,000.00 220,000,000.00 30.14
17 Wegagen 54,287 2,100,000,000.00 390,000,000.00 18.57
18 ZamZam 386,000 4,980,000,000.00 3,620,000,000.00 72.69
Total 16,859,032 186,375,000,000.00 72,732,000,000.00 39.02

Source: NBE June 2023 report

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 Session Four:
Sources of Sharia Law

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 Specific objectives
After completion of this session, participants will be able to :
• Define source of sharia law
• Describe the component of sharia
• Explain all sharia law regarding interest free banking business
• Explain the importance of sharia law in interest free banking

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40
 Sources of Shariah Law

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 Al-Qur’an
• The primary source of Islamic law is the Holly Qur’an
which clearly presents not only the directives relating to
personal conduct but also principles relating to all aspects of
the financial, community, and cultural lives of believers.
• It is the unchangeable and the established indoctrinate of all
God’s messages to all his prophets and followers.
• Considered as the primary guidance for structuring Islamic
banking products and services.
9/15/2023 42
 Sunnah (Method/Tradition)
• It is the second source of law which is the real sayings and
reported actions of the Prophet Muhammad, while the Quran is
considered to be the actual words of Allah.

• Sunnah clarifies the directives of the Quran by making certain

hidden Quranic restrictions unambiguous by providing essential
elements and details to facilitate their practice.

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 Ijma (Consensus)
• Ijima:- The third source of Sheria law is the Ijma or consensus
of scholars and the significance of delegated legislation to the
Muslim community.
• The consensus reached among different scholars is considered
to be a sufficient evidence for the legal action as stated in the
Sunnah.
• Kamali (2005) was among the Islamic Scholars who described
that the agreement on any religious issues is considered to be a
9/15/2023 source of law in Islam. 44
 • Islamic Scholars who described that the agreement on any
religious issues is considered to be a source of law in Islam
Kamali (2005).
• It is a consensus on various issues amongst the ably-
recognized scholars that provide guidance to the Muslim
Ummah (nation) on various issues.

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 Qiyas (Analogy/comparison)
• Qiyas refers to analogy that is extrapolated from a juristic rule
derived from the Qur’an, Sunnah, or through Ijma on the basis
of an underlying principle,
• Process of taking an established ruling from Islamic law and
applying it to a new case that shares the same basic elements
addressed by the original decisions.
• Develop a new rule for situations that are not addressed by the
Quran or by the Sunnah.
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 Riba
(Usury)
Gharar Short Sale (Future
(Deception, or goods you do not
Speculation) own)

Prohibition
In Islamic
Gambling financial
Monopoly
system

Money
Trading Unfair & Unjust
(money is Contracts
payment Unlawful &
mechanism) unethical
trade

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 Products that
exchangeable for
money

Products that are Products are

not monopolized not prohibited
by one party
in Islam
Shari'ah
Compliant
Products
Products are Products are not
traded in the traded under
open market duress
Products that
are free from
Riba
9/15/2023 48
 Summary of Sources of Islamic Law

Qiyas ➢ The process of analogical reasoning.

Ijma ➢ Consensus of the larger majority of

classical jurists of the Muslim of the
prophet .
Sunnah and
Hadith ➢ Sayings, deeds, action, approvals,
disapprovals of prophet Mohammed

Quran
➢ Divine Revelation

49
 WHY INTEREST FREE BANKING

• Access to formal financial service is low in Ethiopia;(Sharia)

• Existence of large Potential demand, can be inferred from:
Request for IFB service for long
• Target population represent large group ;
• NBE authorization for Both Window and Dedicated branches
• The Banking Industry Dynamism and Focus
• Financial inclusion helps for high deposit resource
• For customer satisfaction-retain existing, expand CB base.
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• Regulatory and legal environment seems workable
 Session five :
Conventional Vs Islamic bank(IFB)

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 Specific objectives
After completion of this session, participants will be able to :
• Appreciate the differences and similarities between
conventional and Islamic banking
• Describe money implication in conventional bank and
interest free bank
• Explain customer relationship as of conventional banking
• Explain customer relationship as of IFB banking
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 • What is the difference between the Conventional and
Interest Free Banking Service?

• Is it possible the customer of IFB to be the customer of

conventional Bank or vice versa?

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 Conventional Vs. Islamic Banking
Conventional Banking
Customer uses the
Customers deposit
Bank loans money to money to buy a
Conventional Banking

(as loan) to Bank

Customers property

Customer pays
Bank pays interest and principal interest and principal

Customers invests (as capital) Bank buys a property and leases

with Bank the property to Customers
Islamic Banking

Customer pays to Bank lease

rentals (comparable to interest)
the purchase price for the
Bank pays profit and capital property over time (comparable
to principal payments)

54
How do Islamic Banks Mobilise Funds?
– Customers will deposit the funds as capital providers (Rab al-Mal) to the
Bank
– Bank will act as the Mudarib (Manager) to manage the capital provided
Customers invest (as by the Customers
capital) with Bank – Bank cannot guarantee the return of capital unless Bank is negligent or
in default of its Manager’s obligations
– Bank will invest the funds in Islamic transactions like:
• Murabaha (credit sale)
• Ijara (leasing)
• Salam (Advance payment), etc

Bank pays profit and

– The profits realized by the Bank from the Islamic transactions will be
capital
shared between the Bank and the Customers
– Bank cannot guarantee Profit to the Customers
– The Bank is not a borrower
– The Bank is the manager of funds invested by the Customers
– This is known as Mudaraba Contract

55
How do Islamic Banks Book Assets?
– Bank will use the Mudaraba funds to invest in
Islamic transactions like:
• Murabaha (credit sale)
• Ijara (leasing)
• Salam (Advance payment),
• Other forms of Islamic contracts, etc
– Investments are not allowed in the following sectors:
• gambling, tobacco, alcohol, pork, financial
institutions, arms

56
 money
Bank Client

money + money (interest)

Conventional
Banking System

57
Bank Goods & Client
Services

money

Interest Free Banking System

58
 Characteristic Interest Free Banking System Conventional Banking System
(interest based)

Business framework Functions and operating modes are based on Functions and operating modes
Shari’a, and Islamic banks must ensure that are based on secular principles,
all business activities are in compliance not religious laws or guidelines.
with Shari’a requirements.

Interest charging Financing is not interest (riba) oriented and Financing is interest oriented, and
should be based on risk-and-reward sharing. a fixed or variable interest rate is
charged for the use of money.

Interest on deposits Account holders do not receive interest Depositors receive interest and a
(riba) but may share risk and rewards of guarantee of principal repayment.
investments made by the Islamic bank.

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 Characteristic Interest Free Banking System Conventional Banking
System
(interest based)
Risk sharing in equity Islamic banks offer equity financing with Risk sharing is not generally
financing risk sharing for a project or venture. Losses offered but is available through
are shared on the basis of the equity venture capital firms and
participation, whereas profit is shared on investment banks, which may
the basis of a pre-agreed ratio. also participate in management.

Restrictions Islamic banks are allowed to participate Conventional banks may finance
only in economic activities that are Shari’a any lawful product or service.
compliant. For example, banks cannot
finance a business that involves selling pork
or alcohol.

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 Characteristic Interest Free Banking System Conventional Banking System
(interest based)

Penalty on default Islamic banks are not allowed to Conventional banks normally charge
charge additional Interest in case of late
penalties for their enrichment. They payments or defaults.
may,
however, allow imposition of default
or late payment .Penalties may be
donated to a charity
Avoidance of gharar Transactions with elements of Speculative investments are allowed.
gambling or speculation are
discouraged or forbidden.

Customer relationships The status of an Islamic bank in The status of a conventional bank in
relation to its clients is that of partner relation to its clients is one of creditor
and investor. and debtor.

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 Characteristic Interest Free Banking System Conventional Banking System
(interest based)

Shari’a supervisory Each Islamic bank must have a Conventional banks have no such
board supervisory board to ensure that all its requirement.
business activities are in line with
Shari’a requirements.

Statutory requirements An Islamic bank must be in A conventional bank must be in

compliance with the statutory compliance with the statutory
requirements of the National bank of requirements of the central bank of the
the country in which it operates and country in which it operates and in some
also with Shari’a guidelines. places, the banking laws of state or other
localities.

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 • Profit in a business venture is determined ex post-that is, depending on the
outcome of the venture but based on the predetermined profit/loss ratios. (for
partnership contracts)

• On the other hand, interest, which is determined ex ante-that is, predetermined

regardless of the outcome of the venture.

• Profit in a trade or a sale may be determined ex ante, but it is based on trading

real assets between contracting parties, not lending of money on interest.

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 Emphasis IFB services?
IFB services emphasize on:

• Ethical;
• Social;
• to enhance equity and fairness for the general good of society;
• These services are not limited to commercial banking and extend into capital
markets, insurance ( Takaful) and other channels of non-bank financial
intermediation
• Also known as “Socially Responsible Investing (SRI)”
• Ethical investments is a process of identifying and
investing in companies that meet certain standards of Corporate Social
Responsibility (CSR)
64
 Session Six:
IFB BANKING MODELS

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 Specific objectives
After completion of this session, participants will be able to :

• Explain the type of IFB banking models

• Describe the benefit of IFB window model service
• Define IFB window model service
• Define IFB branch model service

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 What are the four models
to deliver IFB service?

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 IFB Banking Models
There are 4 IFB Banking Models:

• Dedicated Window

• Dedicated Branch

• Subsidiary

• Fully Fledged

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 IFB Banking Models
Dedicated Window
• slamic banking windows operate as the shariah-compliant
division of a conventional bank.
• This structure usually has a separate unit responsible for
shariah compliant banking products
• There is usually an assurance that there is no contamination
of client’s funds with any interest-based funds.
• Within a single branch, clients have the option to select
Islamic banking products or the conventional banking option

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 IFB Banking Models
Dedicated Branch Model
• This model is similar to the windows model. However, in
this case, dedicated branches are established for the
delivery of shariah compliant products.

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 IFB Banking Models
Subsidiary Model
• a conventional bank develops a subsidiary under its entity
to deliver shariah compliant products.
• The advantage of this type of model is that the subsidiary
can establish its own processes and an independent
operating structure.
• It can also formulate it own policies that are in line with
sharia but still manage to fall within the parent company’s
strategies

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 IFB Banking Models
Fully Fledged model
• These banks are solely founded on the tenets of the Shariah.
• They have independent operating structures that are not part
of conventional riba- based institutions.
• Only shariah-compliant forms of investment andfinancing is
offered

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 End of
Day One!
 Session Seven:
Siinqee IHSAN (IFB) Deposit product

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 Specific objectives
After completion of this session, participants will be able to :

• Explain the type of siinqee IHSAN deposit product

• Describe the Feature of siinqee IHSAN deposit product
• Define all siinqee IHSAN deposit product
• Explain principle of segregation
• Explain the importance of siinqee IHSAN deposit product
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 Siinqee ihsan (IFB) Deposit Products

Conventional
IFB deposit
Banking (CB)
Product
deposit product
LCY deposit LCY deposit
Product product

FCY deposit
product

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 Wadia
Local currency deposit Product
• Saving deposit Mudaraba

Amana current Account

• Demand deposit
ECX related accounts
• Fixed time deposit
Foreign currency deposit product
1.Lel- nissah women ;
• Amana FCY (Current/Checking/Demand) Account. 2.Lel -murhaqayin ;
3.Lel-Tealim ;
• Wadia FCY Saving accounts 4.Labbaik /hajj/umra
• Wadia Diaspora Mortgage Savings Account 5.Eid wadi’ah;
6.wadi’ah farmers ;
7.wadi’ah Lel- Nikkah
8. wadi’ah zakat
9.Lel –shebab youth

9/15/2023 78
 Principle
• These accounts are liabilities to the bank,

• Customers of these account keep their money for safety and to facilitate
fast cash transaction

• These accounts do not share profit,

• The bank guaranteed the deposit fund,

• The bank shall get full authorization from Wadia Saving depositors to
use the fund,

• Permission not necessary to use the Amanah current accounts,

9/15/2023 79
 Principle
• The Bank can use the fund at its own risk,

• If there is a loss in any of the financed business, the loss is born by the Bank,

• The financed amount is considered as equity of the Bank,

• All the profits generated from the use of the funds belong to the Bank,

• Depositors have the right to deposit or withdraw their funds at any time,

• No deposit or withdrawal restriction,

9/15/2023 80
 Discussion
• What do you understand by the word segregation?
• Why is segregation mandatory?
• What is your perception with this issue?
• What is the perception of customers about segregation?
• What do we segregate?

9/15/2023 81
 PRINCIPLE OF SEGREGATION
• The Banks shall establish different capital funds, accounts
and reporting systems for each type of the activity,
• Shari’ah-compatible funds should not be mixed with non-
Shari’ah funds or investments

9/15/2023 82
 PRINCIPLE OF SEGREGATION
• Co-mingling of non-Shari’ah compliant funds are not allowed
• Separate accounts, records to be kept
• Profits will be segregated
• Consolidation final reporting purposes will be allowed

9/15/2023 83
 PRINCIPLE OF SEGREGATION
• IFB use different capital funds, accounts category
• Use its own reporting systems for each type of
activities
• IFB considered as a separate entity/bank from the rest
of the conventional bank

9/15/2023 84
 PRINCIPLE OF SEGREGATION
• Use different banking solution (system) for the IFB transaction
• Use different chart of accounts

➢ Cash flow statement:- IFB Cash Vault, LCY and FCY

➢ Balance sheet:- separate records for asset and liability
accounts
➢ Income statement:-
✓Income categories, (income from financing, commission and
service charges),
✓Expense:- general and administrative, if any
• But, why/how do we segregate expense?

9/15/2023 85
 PRINCIPLE OF SEGREGATION
We segregate:-
• Window:- Branches offering the IFB service in window model
shall strictly segregate their windows,
✓The window delivers only IFB related products and services,
• Operational:- All the required formats and procedures shall
respect the IFB principle,
• System:- Different core banking for keeping different recordings
shall be in place.

9/15/2023 86
 Wadia Saving Features
• No restrictions on the number and amount of deposit and
withdrawals
• Account operation shall be through the use of formats
prepared for exclusively prepared for the IFB service;
• With the permission of the customer while opening the
account, the IFB window service can make use of the fund on
any permissible business financing;
9/15/2023 87
 Wadia Saving Features
• No benefit is attached to this account. All profits generated
from the use of the funds belong to the bank
• No additional contract is required,
• It is operated by passbook , Card, MB and IB
• A minimum amount has to be kept on saving account is Birr 50
and possible to open with zero balance
• It can be maintained by natural or legal persons.

9/15/2023 88
 Wadia Saving Features
• There will be no service change in relation to such account except
for transaction effect via ,ATM ,POS or other cash dispensing
outlets and for lost passbook replacement and other cost recovery

activities.
• The customer can withdrawal the balance at any time they so
desire and the bank guarantee the refund of all such balance

9/15/2023 89
 Wadia Saving Features
Account Maintenance on CBS
• The account is opened as per the bank’s policy and
procedure

• This account is operated by using passbook; exclusively

prepared for the IFB service

• IFB account opening format is used,

• No additional contract is required,

• IFB formats shall be used for the services,

9/15/2023 91
 Lel shebab /Wadia Youth Saving Account Features
• It is offered for individuals in the ages of 18-24

• The minimum balance to open this account is birr 50

• It shall be converted to wadia saving account at any time

• Can be operated with voucher, Debit Card, mobile and internet

banking application/ system

9/15/2023 92
9/15/2023 93
 Lel- murhaqayin /Wadia Teen Youth Saving
• It is designed for individuals in the ages of 14-17

• Self-employed/employed teens between the ages of 14-17

years can open and operate this account by providing letter of
confirmation from the Zone/Woreda administration and school
administration

9/15/2023 94
 Lel- murhaqayin /Wadia Teen Youth Saving

• The parent(s) or the tutor of the teen youth can open the
account for unemployed teen or teen without own source of
income

• Whenever, the youth reaches 18 yrs of age the account may

be changed to the normal wadi’ah saving account

9/15/2023 95
9/15/2023 96
 Lel-Tealim /Wadia Education Saving Features
• It is designed for saving money for higher education up to
undergraduate programs
• It can be opened for any natural person by himself/herself
and for a minor by the parent(s)/tutors of the minor

9/15/2023 97
9/15/2023 Training on Branch Banking Products 98
 Labbaik Saving Account
• A special kind of commitment saving account for the purpose to
perform Hajj and/or Umrah.
• It is the commitment of our customers to him/her self to deposit
regularly until it reaches a certain amount for Hajji and/or Umrah
related expenses.
Objectives

– Retain customers
– Creating broad and multi dimensions customer base
– For special purpose, lifetime journey of Hajj and Umra.
9/15/2023 99
 Labbaik Saving Account Features
• The minimum balance to open this account is birr 1000;
• No restrictions on the number and amount of deposit and
withdrawals;
• Account opening shall be through the use of formats
prepared for this (Labbaik) saving account;
• Maintained in local currency and deposits can be made
either in birr or acceptable foreign currency;
9/15/2023 100
 Labbaik …….
• The Bank may review Customers' deposit schedule

• The IFB window service can make use of the fund on any
permissible business financing;

• All profits generated from the use of the funds belongs to

the bank;

• The bank may facilitate payment;

9/15/2023 101
 AMANA CURRENT/DEMAND/QARD ACCOUNTS
• The IFB window service provides its customers with cheque
books specifically designed for the same purpose;
• With the permission of the customer while opening the account,
the IFB window service can make use of the fund on any
permissible business financing;
• The Bank may invest all amounts outstanding in this
account, in its absolute discretion, but no return is paid to
the customer ,

9/15/2023 102
 AMANA CURRENT/DEMAND/QARD ACCOUNTS
• The minimum balance to be maintained for Br. 1000
to individual and Br. 2000 to corporate customers
• Penalty is charged as per term and tariff
• Opened and operated by literate
• Cheque is not issued until KYC completed
• This account is literally a loan free of profit (qard),
• It is a loan to the bank
9/15/2023 103
 AMANA CURRENT/DEMAND/QARD ACCOUNTS
Benefits:
• Allowing customers to deposit and withdraw at their convenience,
• It offers standing order and direct debit facilities, e.g by cheque,
• Automatic access to the customer’s account is available through
ATM, Mobile, Internet Banking,
• Deposits may be made by cheque, cash, or by any of the account
transfer methods,

9/15/2023 104
 AMANA CURRENT/DEMAND/QARD ACCOUNTS
Account Maintenance on CBS

• The account is opened as per the bank’s policy and procedure

• Minimum balance is required to open this account

• The IFB account opening format is used

• No contract is required governing the management of the fund,

• Customers of this account shall use the formats prepared for the IFB
services.

9/15/2023 105
 Session Eight :
Source of fund and use of fund

9/15/2023 106
 Specific objectives
After completion of this session, participants will be able to :

• Explain permissible of business and use of fund

• Describe permissible of source of fund
• Explain the importance of mobilize liable fund

9/15/2023 107
 SOURCES OF FUNDS AND USE OF FUNDS

FUNDS SHOULD
BE COLLECTED ADVANCED TO
FROM HALAL HALAL
SOURCES ACTIVITIES

IFB Business overseen by the Shari’ah Advisory Committee

 SOURCES OF FUND IFB PRINCIPLE

Principles
• The source of fund for all the IFB transactions must be
from permissible source
• The bank finance this fund to the permissible business,
Who ascertain the source
• Depositors take the burden of proof for the source
• But, what if it is not from permissible source:
✓ Close the account
✓ Penalized the customer for the breach,
• The Bank shall proof where the fund is financed or deployed,
 Session nine:
Investment account

9/15/2023 110
 Specific objectives
After completion of this session, participants will be able to :
• Explain the components of Mudarabah account
• Define Mudarabah investment account
• Define Mudarabah saving account
• Explain the importance of Mudarabah fund mobilize
• Describe unrestricted Mudarabah investment account
• Describe restricted Mudarabah investment account
9/15/2023 111
MUDARABAHA/INVESTMENT ACCOUNTS
 Questions
1. What benefits does banks get in
mobilizing liability funds?
2. Is it mandatory to launch profit or loss
sharing (PLS) accounts? (discuss, when
to launch and when not to launch the
PLS accounts)
3. What is the associated risk with
commencing this accounts?
 INVESTMENT ACCOUNTS
Investment Accounts classified as;
❖ Unrestricted Investment Accounts
• Mudarabah Saving Accounts
• Mudarabah Investment Accounts
• Mudarabah Hybrid account

❖ Restricted Investment Accounts

• Mudarabah Saving Accounts
• Mudarabah Investment Accounts
 INVESTMENT ACCOUNTS
Principles
• Customers keep their money to generate profit,
• The primary role of these customers is to assign the bank as an
agent or working partner,
• Deposits of this type are not guaranteed,
• Customers share the profit or loss with the bank as per their prior
agreement,
• Both the supplier of the capital and the bank share the profit, if
any or
• Both suffer together when returns are poor,
 Unrestricted Investment Account Holders (UIAH)
• UIAH means customers deposit money in Bank without any
pre-defined condition,
• The management of the fund is left to the Bank (Mudarib),
• The Customers’ give the right to the Bank to choose the
appropriate mode of finance,
• The bank has autonomous right to use the fund in any
permissible business,
• The Bank acts as it considers profitable, and choose the best
among the alternatives,
• The Bank participates in the profit or loss with the depositors,
 Unrestricted Investment …

Rab ul Mal (Capital IFB, Mudarib (Labor, Investment (Any

Provider) Expertise) permissible business)

• The profit sharing ratio between the Rab ul Mal and the
mudarib is agreed ahead of time,

• The profit allocation ratio must be clearly stated and must

be on the basis of an agreed percentage,

• Customers can claimed profit, if the Mudharaba

operations make a profit.
 Unrestricted Investment …

• Losses incurred due to negligence or mismanagement of the

mudarib is borne by bank or mudarib,
• Any losses, out of the mismanagement of the business will be
borne by the Rab ul mal,
✓Rab ul mal losses their capital contribution,
✓Bank or Mudarib looses his labor, expertise, time
• Injecting of funds from other sources is permitted,
• The account is disclosure under financial position of bank,
(Balance Sheet)
 Unrestricted Investment …

But, what is Mudaraba?

• Mudaraba refers to an investment on behalf of the customer by
a more professional investor that is by the bank,
• One provides the fund and the other provides expertise or labor

• It is a consent to combine the interest of the two parties;

Provider of fund, rab-ul-mal (beneficiary) and the Bank,
Mudarib, working partner or managing trustee

• The mudaraba contract facilitates the cooperation between the

depositor and the bank
 Unrestricted Investment …

• The fund comes from the rab-ul-mal while the management and
work is an exclusive responsibility of the mudarib,
• They share the generated profit in a predetermined profit
sharing ratio (PSR),
• The bank made every effort to generate higher profit rate on all
the mudaraba accounts which shall be market competitive all
the time,
• The Rab-ul-Mal, deposits the fund for the benefit of profit or
loss sharing for defined or undefined time,
 Unrestricted Investment …

• Both parties cannot allocate a lump sum amount of profit i.e,

10,000 each

For example:- If Mr. x invests 50,000 in Y Bank for benefit, they

cannot agree on a condition that 7,000 out of the generated profit
shall be the share of mudarib or rab-ul-mal.
• Why?
• But both parties shall share on a predetermined ratio,
• They can share the profit at any ratio they agree upon
 Unrestricted Investment …
Customer deposits for mudaraba account
Deposit fund for profit
Rab-ul-mal/client Mudarib/bank

The customer losses capital

Finance

losses Business Enterprise

Profit Sharing as per the pre-agreed ratio

Profit
 Unrestricted Investment …
Basic Characteristics of Mudaraba Accts
• Profit sharing between the two parties cannot be a lump sum or
a guaranteed return,
• The rab-ul-mal is not liable for losses beyond his capital
contribution,
• The mudarib does not share in the losses except for the losses
of his time and effort,
• The bank at its absolute discretion pay gift or hiba. Why?
✓ To encourage the depositors,
✓ To increase customer satisfaction,
✓ To recruit loyal customers
✓ To compensate the difference between the expected and actual amount of profit sharing,
 Unrestricted Investment …
• Mudaraba Saving is a type of saving account which is
normally considered as non-time bound contract
• Any accrued profits shared between the two parties on a
pre-determined PSR,
• Operated with pre-determined profit sharing ratio, of
67/33, 70/30, 45/55, 75/25 etc.
• If the Bank suffer losses in its business venture, the loss
will be compensated by the reserve, Mudarib share or by
the depositors.
 Unrestricted Investment …
• Minimum balance required to open the account
• Minimum average monthly balance shall be specified in order to be
qualified for profit sharing,
• Customers have the right to withdraw or limit the amount,
• Profit calculated on the basis of the minimum Average Balance
maintained for a month,
Average Daily end of day’s balance for current PD period
balance Total No. of days for the current PD period
• Weighted Average balance = Average balance * Weightage
 Mudaraba Saving Accounts
• Mudarabah saving account is a profit generating account operated by
passbook
• The operational procedure and/or the bank’s mudaraba policy is used
to operate the acct
• This account is operated by the use of passbook; exclusively prepared
for IFB service
• Operated by the use of IFB formats
• Contract signed for the management of fund
• Customer take one copy of the contract after signing by the Bank’s
official and stamp
• The Bank shall give the product disclosure sheet during account
opening, if any
 Mudaraba Saving …
Benefits
• Allowing customers to deposit and withdraw funds at their
convenience, or restrict the amount
• It offers standing order or through any direct debit facilities
• Automatic access to the customer’s account is available through
mobile, internet banking, and ATM
• Deposits may be made by cash, or by any of the account
transfer methods
• Purpose related Mudaraba Account is also possible
 Mudaraba Investment

• The account is opened for a limited period or on term bases

• Share profit and loss with bank as per Pre-determined profit/loss
sharing ratio
• Profit sharing margin can be variable among customers based on

✓Duration,
✓Customer type
✓Account type
✓Volume of deposit.
 Mudaraba Investment

• The minimum amount is required to have such investment Account

• Mudaraba investment Accounts to be eligible for profit shall keep
their fund at least for one month,
• The deposit duration may be for 3, 6, 9, 12, 24 or more months,
• The Bank may change the duration by considering the deposit and
financing policy.
• The Bank can also revise the threshold, as required;
 Mudaraba Investment
• Bank provide the customer with Certificate of deposit at the time of
concluding the contract as an evidence of the deposit.
• Separate account opening format is required,
• The customer shall have separate account to facilitate transaction,
• The depositor shall sign the contract with the bank governing the
management of the fund
• Customer take one copy of the contract
 Mudaraba Investment

Benefits of Mudaraba deposit

• Upon maturity, the customer shall

✓ Withdraw the whole balance including the profit
✓ Withdraw the profit and reinvest the principal
✓ Reinvest the principal and the profit
• The customer has to state in writing about the change,
 Mudarabah Different tenures (see example

Mudarabah profit/loss share distribution

POOLONE(1) THREE POOL TWO (2) SIX POOL Three (3) NINE POOL FOUR(4) Twelve
(3)MONTHS (6)MONTHS (9)MONTHS (12)MONTHS
S.N DEPOSIT IN ETB MUDARABAHA MUDARABAHA MUDARABAHA MUDARABAHA POOL Five(5) FCY saving

1 50,000 to 1,000,000 60:40 62:38 63:37 67:33

2 1,000,000 to 25,000,000 68:32 73:27 71:29 70:30

3 50,000,000 to 75,000,000 80:20 72:28 68:32 65:35
4 75000000 to 100,000,000 75:25 70:30 65:35 62:38
5 100,000,000 to 150,000,000 70:30 68:32 62:38 60:40
6 150,000,000 to 200,000,000 69:31 65:35 60:40 58:42
7 200,000,000 to 300,000,000 73:27 62:38 68:32 75:25
8 300,000,000 to 400,000,000 66:34 64:36 71:29 52:38
9 400,000,000 to 500,000,000 60:40 58:42 52:48 65:35
10 500,000,000 to 750,000,000 58:42 55:45 60:40 61:39
11 750,000,000 to -1,000,000,000 65:35 52:48 50:50 37:47
12 Above 1,000,000,000 52:48 50:50 48:52 45:55
 Mudaraba Hybrid account

• A type of account which has a combined features of both

mudarabah saving and amanah /Qard current account

• The account to be transacted using cheques shall to be opened

to edir, equib, cooperatives, trade unions and other communal
associations
Key features of Mudaraba Hybrid account
• The minimum balance to open this account is birr 10,000
• one partner( the customer )provides the funds while the other
(the bank) provides expertise and management

• only profit earned is shared between both of them on pre agreed

ratio while loss is entirely born by the provider of the capital

• Cheques book facility is available to provide ease of withdrawal

• No debit card shall be issue against such account
 Illustration on Mudarabah Investment Acct
• Mr. X/Rab Al Mal invested/deposited $200,000,000 in Y bank with
profit sharing ratio of 70:30 (Rab Al Mal: Bank respectively). If the
investment results in a profit of $1,000,000 during the first quarter,
then the Mudarib/bank will get 30% i.e. $300,000 (30%x
$1,00,000) and the Rab Al Mal will get $700,000 (70% x
$1,00,000).

• However, if the investment resulted in a loss of $1,000,000 instead,

then all this loss will be borne by the Rab Al Mal, unless the
Mudarib was negligent.
 Bank's Customer
PER Amount share share IRR Amount Profit Tax
Profit Amount 2% after PER 40% 60% 1% after 1% 5%

1,000,000 20,000 980,000 392,000 588,000 5,880 582,120 29,106

How to pass these Transaction Entries @ branch level
Step 1
Profit Expense 608,000

Suspense bridge acct 608,000

Step 2
Suspense bridge acct 608,000
Customer Account 588,000
PER 20,000
Step 3
IRR 5,880
Customer Account 5,880
Step 4
Profit Tax Payable 29,106
Net pay to customer 442,411.20
Customer Account 29,106
 Restricted Investment Account
Principle
• It is the owner of the fund (customer) specify the fund to be
used in a particular place or business for a fixed or for
specified purpose.

• The Bank act as an intermediary or agent of the depositors to

place funds on their behalf in various business ventures or
investment proposals.
 Restricted Investment Account
• The Bank is entitled to the management of the fee,

• The depositors get a profit or loss from the investment which is

entirely goes to the depositors,

• The Banks income is classified as a management fee,

• Restricted investment account may be classified as leasing, trade

financing, equity investment
 Restricted Investment Account
• The investor restricts the manner as to where, how and for what
purpose the funds are to be invested,

• Injecting of funds from other sources is not allowed to ensure proper

management and accountability of the funds,

• A separate disclosure is required in the form of Statement of

Restricted Investments, (off-balance sheet)
 Session Ten:
• IFB POOL MANAGEMENT

9/15/2023 140
 Specific objectives
After completion of this session, participants will be able to :
• Explain the components of IFB pool management
• Define IFB pool management
• Define profit sharing and distribution
• Explain the importance of IFB pool management
• Describe Profit Equalization Reserve (PER)
• Describe Investment Risk Reserve (IRR)
9/15/2023 141
IFB POOL MANAGEMENT
 IFB POOL MANAGEMENT
Principle
• It is a summation of deposit accounts from ‘Permissible’ sources that
is modified for controlling of total balance, withdrawal for financing,
minimum reserve balance as well as average deposit balance.
• Pools may be classified as:-
✓General pool
✓Specific pool
• Pools assigned according to the bank’s deposit policy and procedure,
• Weightages or pre determined PSR,
 IFB POOL MANAGEMENT

Features
• It is like a virtual enterprise, explicitly demarked source of fund,
income and expense,
• Defined at the time of accepting deposit
• Different pool management may led to reputational risk, for each
pool have different return and risk structure,
• Mostly foreign currency accounts have different pool.
How it functions on CBS?
 IFB POOL MANAGEMENT

• The pool creation may be based on the customer type, or account

type, or deposit amount, or duration of deposit
• But each have different return and risks,
• Any financing is primarily used from the pool of Mudaraba
accounts,
• If the financing amount is above the pool’s balance, the bank can
finance from the other IFB deposit sources,
• Precaution shall be considered in liquidity issue while the
management of the pool’s fund.
 IFB POOL MANAGEMENT

Summary of Pool
 PROFIT SHARING AND DISTRIBUTION
Principle
• The IFB principle allows to share higher profit/loss for longer
and big depositors,
• The higher the fund and the longer the term of deposit is better to
customers to get more return or loss,
• The profit share for Mudaraba accounts are calculated on daily
bases based on the available outstanding balance,
• The payment may be on weekly, monthly, quarterly, semi-
annually or annually.
 PROFIT SHARING AND DISTRIBUTION

Profit sharing mechanism shall be;

• Self-operating price mechanism,
• Prices are based up on supply and demand,
• Profits must be fair & cannot be unfair,
• The IFB principle does not allow prices to be fixed,
• Prohibition of false prices, artificially increasing prices,
 PROFIT SHARING AND DISTRIBUTION

How do we account the expense?

• The mudarib cannot claim any periodical salary or fee for the
work done,
• Why?
• The two parties shall agreed on PSR only,
• Indirect expenses are borne by the mudarib,
• Direct expenses are claimed from the pool before sharing the
profit,
• To evaluate the performance of IFB process the Bank shall use
either,
➢Ratio method or
➢Accounting each transaction methods
 PROFIT SHARING AND DISTRIBUTION

Reflect on the following

Given:-
1. Total Mudarabah Deposits 80,000,000

2. Total Financed Amount 100,000,000

3. Wadi’ah Deposits (Injected fund) 20,000,000

4. Profit earned during this month 1,000,000

Given:-
1. How much is the Bank’s capital contribution to the financed amount in percentage?
2. How much is the Bank’s profit share from the injected fund to the pool’s profit?
 PROFIT SHARING AND DISTRIBUTION

Answer: 20% and 200,000 Birr respectively

If the pre-determined PSR is 40% bank and 60% customer,
calculate the profit share.
Birr 320,000 to the bank, and
Birr 480,000 to the Depositor
Total profit of bank from the pool’s profit is
200,000+320,000 = 520,000 Birr
While distributing accrued profit to the depositors we base;
❖Amount of investment
❖ Duration of Investment
❖Type of Customer
❖ Type of Account
 PROFIT SHARING AND DISTRIBUTION

• Depositors participate in the production of income in

accordance with their respective amounts and duration.
This is the most equitable method of delivering the respective
entitlements to (depositors) and is in accordance with the
Islamic Fiqh Academy of Jeddah's resolution no 13/5.
 PROFIT SHARING AND DISTRIBUTION

• Assume the market price rate is 7% but what if we pay 10% or

5% profit to the customers?

• If the investment resulted in a loss, the customers will pay the

loss, but what are the mitigating factors for this issue?
 Profit Equalization Reserve (PER)
Meaning
• Fund left from the net income of the pool
• The fund is left before the bank and customer share the fund
Purpose
• Used to smoothen the regular profit payment to depositors,
• Used to improve the profit payment to depositors during the
pool’s profit is below market expectations,
 Profit Equalization Reserve (PER)
Actions
• Stabilizes Profit from Mudaraba portfolio,
• Allocate Profit from Mudaraba portfolio to PER when the profit
rate exceeds expected payout rate (Credit PER),
• Draw Profit from Mudharaba portfolio when the profit rate is
below expected payout rate (Debit PER),
• PER may dry up and may not be sufficient to support expected
return,
• Bank may give Hibah to customers to the level of expected
return, if profit rate is lower than expected.
 Profit Equalization Reserve (PER)

• PER may not be kept during periods when returns are below
market price rate,
• The bank keep more fund during the profit payment, if it is
above market expectations,
• The amount kept may vary from period to period in percent,
• The bank has the right to finance the balance from the PER and
credit to the PER account proportionally
Profit Equalization Reserve (PER)

• It is the fund left before distributing profit to customers,

• The fund is the liability to the bank, for the bank do not
have the right on the balance,
Investment Risk Reserve (IRR)
 Investment Risk Reserve (IRR)
Purpose
• In financing, the pool may incur losses due to write-offs and losses of
the investment,
• Used to offset or absorb the loses,
• Used to cover future investment losses,
• The bank can invest the balance and credit the return to the account,
• The amount kept in percent may vary from period to period, if any
 PROFIT DISTRIBUTION PROCESS
Gross Income of the Pool

Less:- Direct Expense, write-offs & losses of investment

Net income of the pool

Deduct:- Profit Equalization

Reserve, if any
IFB’s profit proportion from the Profit earned on the depositors fund
injected fund

Bank’s profit share as Mudarib Depositors’ Profit

Deduct:- Investment Risk

Reserve, if any Depositors’ Profit after IRR, if any

Fund distributable amongst each

customers after profit tax