Framework of Rate of Relurn
prior dcclnration of Lhc same before starting of the accounling year'at 1hi.: time
of Mudaraba conlracl.
v1. Mudaraba deposits shall get priority in the matters of investment over Bank's
Equity and other Cost-Free Fund i.e. Bank's Equity & Cost Free Fund will be
deployed only after full investment of Mudaraba deposits. Bank's Equity shall
mean and include paid up capital. statutory reserve. investment loss off-selling
reserve. general reserve and any other reserve or fond created by Lhc bank.
Cost Free Fund means any Lype of funds received by Lhe bank free of cost and
not for sharing any income of the bank.
vii. Mudaraba fund accepted by the Islamic bank shall be utilized in all sorts of
investment activities (i.e. general invt:stment, investment in shares &
securities. placement with oLher banks and financial instilutions etc.) approved
by the bank's Sha.riah Supervisory Board as well as Board of Directors of the
Bank.
viii. [ncome from F:xchangc Gain derived from buying & selling of foreign
currency should be shown separately (in the Annexure-1) and Lo be added
in the distributable income for the purpose of distribution of profit to
depositors.
ix. Islamic Banks and Islamic Branches of the
Conventional Banks will be required to assign weighlage Lo all types of
Mudaraba deposits. The wcightagc will represent the importance allached to
the holding of each deposit in determination of profit. In this context. the
assumption held is that longer the tenure of a Mudaraba deposits. the higher
the risk.
The v.t:ightage and any subsequent chang in weightage of Mudaraba
deposits should be disclosed to Mudaraba depositors before the sLarting of any
accounting year/ Mudaraba contract.
x. Profit may be calculated on different types of Mudaraba deposit accounts as
per their respective rules for time & manner of deposit and withdrawal
restrictions.
1
Framework of Rate of
Return
xi. Mudaraba deposits shall mean average balance of all types of Mudaraba
deposit accounts standing in the books of the bank as on last day of each
month during the accounting year to which the distribution of income relates
after deducting Statutory Liquidity Reserve lo be maintained as per Bank
Company Act. 1991 (as per Annexure-1 ).
5. Framework
The framework encompasses three types of tables:
1 ablc-1: Profit Calculation Fonnat-1: Ratio of Partit;ipaling Fund in the
Outstanding Investment for the accounting year (as show11 in Annexure-1).
Table -2: Profit Calculation Format-2: Distributable Profit for the accounting year
(as shown in Annexure-2).
Table-3: Profit Calculation format-3: Allocation of Distributable Profit to
Mudaraba Depositors and the rate of return for lhe accounting year (as shown in
Annexure-3).
6. Methodology
The methodology in deriving the distributable profit to Mudaraba depositors using
the three tables described in Para 5 could be better understood from the following
example:
Ex.ample:
Business information of an Islamic bank as on 31/12/2004 is given below:
Tk in Crore
l. Paid up Capital & 100
Reserve
2. Total Al-Wadiah and Other Cost Free deposits 120
Sub Total 220
3. Mudaraba Deposits:
a) M. Hajj Deposits above IO years 5
b) M. Special Saving Scheme up to IO 30
years 5
c) M. Savings Bond for 5 years 10
d) M. Savings Bond for 8 years 80
e) M. Term Deposits for 3 months
2
Framework of Rate of
Return
Tk in
1) 1. fem1 Dcposits for 6 months
Crore
g) M. ·1 erm Deposits for 12 months
100
h) M. f'em1 Deposits for 24 months 90
I) M. Tem1 Deposits for 36months 70
j) M. Savings Deposit 100
250
k) M. Short Notice Deposit (SND) 40
Total Mudaraba Deposits Tk. 780 Crorc
Total fund (220 + 780) = Tk. I000 Crorc
Total Outstanding Investment 800
(Excluding profit reccivablc. profit/rent/compensation suspense etc.)
Gross Investment income 96
Assume that the above figures of all types of funds and investments have
been continued in average from January to December 2004 and Profit
Sharing Ratio (PSR) between the Mudaraba deposits and the hank (Muc.larib)
is 65:35 and SLR is 10%.
Other information:
Mudaraba Deposits: Weightagc
a) M. Hajj Deposits above IO years 1.35
b) M. Special Saving Scheme up to JO years 1.30
c) M. Savings Bond for 5 years 1.10
d) M. Savings Bond for 8 years 1.25
e) M. Term Deposits for 3 months 0.88
t) M. Term Deposits for 6 months 0.92
g) M. Tcm1 Deposits for 12 months 0.96
h) M·. 1erm Deposits for 24 months 0.98
I) .\1. fcrm Deposits for 36months 1.00
.i) M. Savings Deposit 0.75
k) M. Short Notice Deposit (SND) 0.55
Allocate the distributable income for Mudaraba depositor and
calculate the rate of return for different Mudaraba deposits using the
Format shown in Annexurc-1, 2 and 3.
Solution:
Let us fill-up the Table using the data above in the annexurc shown in I, 2 and 3.
3
Table-1: Ratio of Participating Fund in the Outstanding Investment for the year 2004
(In Crore Taka)
Month Outstanding Mudaraba Deposits Less: Net.M Cost Free
Investment Mud. MSS M MM MS M Term M SND Total Liquidity Deposits Fund
Hajj Muhar PDS Bond Savings Reserve Deployed
1 2 3 4 5 6 7 8 9 10 11=(3+-10) 12(11x10%) 13(11-12) 14(2-13)
Jan 800 5 30 15 440 250 40 780 00 78 00 702.00 98 00
Feb 800 5 30 15 442 251 42 785.00 78.50 706.50 93.50
Mar 800 5 29 15 441 249 40 779.00 77.90 701.10 98.90
Apr 800 6 31 14.5 441 250 41 783 50 78.35 705.15 94.85
May 800 5 31 15.5 440 250 40 781 50 78 15 703.35 96 65
Jun 800 4 28 15 438 250 38 773 00 77 30 695.70 104.30
Jul 800 5 30 15 439 248 39 77600 77 60 698.40 101.60
Auq 800 5 29 16 439 250 40 77900 77 90 701.10 98.90
Sep 800 5 32 15 440 250 40 782 00 7820 703.80 96.20
Oct 800 7 30 14 5 440 251 41 783 50 78 35 705.15 94.85
Nov 800 5 29 14.5 440 251 40 779 50 77 95 701.55 98.45
Dec 800 3 31 15 440 250 39 778.00 77 80 700.20 99.80
Total
Monthly
Product 9600 60 360 0 0 180 5280 3000 480 9360.00 936.00 8424 00 1176.00
Total Yearly
Product 800 5 30 0 0 15 440 250 40 780 78 702 98
Ratio of
Each
Participa- 87 75% 12.25%
tinQ fund
Note:
Outstanding Investment= Total Outstanding Investment - (Credit Balance of Profit Receivable NC, Unearned Income Ne
. ProfiU Rent/ Compensation Suspense NC etc.)
Ratio of M.Deposits = Net M. Deposits (col. 13) x 100
Outstanding Investment (col 2)
Ratio of C.F.Fund = Cost Free Fund (col. 14) x
100 (Including Bank's
Outstanding Investment (col. 2)
Equity)
73
