Modes Of Investment Under Islamic Banking
Investment Instrument of an Islami Bank:
Islami Bank invests its money in various sector of the economy through different modes permitted by shariah and approved by Bangladesh Bank. The modes of investment are as follows:
3. Murabaha [ Commercial, Post Import (MPI)
4. Bai-Muajjal (Commercial, T.R, Wes Bill)
7. HPSM (Real Estate, Commercial, Transport, Industrial)
8. Quard (Instrument, PF & Others)
9. ICS (Installment Credit Scheme)
10. Micro Credit, Micro Enterprise, Small & Medium Enterprises [SME].
Generally Islami Banks provide mainly 10 (Ten) modes of Investment to the clients. Beside these modes some special type of Investment also made on the basis of circumstances & nature of Investment.
INVESTMENT MODES OF ISLAMI BANKING :
MUDARABA (Trustee Profit Sharing / Partnership) :
Means an agreement between two parties under which one party provides capital and the other party contributes his skills, efforts and work for a percentage of profits. The owner of the capital is known as “Shaheb- Al- Maal “and the user is known as” Mudarib”. In the event of loss, the owner of capital (Shaheb- Al- Maal) shall bear entire loss unless such a loss arises as a result of infringement, negligence or breach of the occasion by the other party (Mudarib).
AAOIFI says– Mudaraba is a partnership in profit, whereby one party provides capital (rab al mal) and the other party provides labour (Mudarib).”
IDB says- Mudaraba is a form of partnership where one party (sahib al mal/ rabbul mal) provides the fund while the other provides the expertise and management. The later is referred to as the Mudarib (Manager). Any profit accrued is shared between the two parties on a pre agreed basis, while capital loss is exclusively borne by the partner providing the capital (Sahib al mal)
Bank Company Act -1995 (Correction)- Mudaraba means such in term of which a bank conducted in accordance with the Islami Shariah provides capital for anything and the customer employees his efficiency, effort, labour and intelligence”.
Types of Mudaraba :
Mudaraba contracts may be divided into Two types:
i) Restricted Mudaraba – Having more than one specific purpose of objectives.
ii) Unrestricted Mudaraba – Having one specific purpose of objectives.
CONDITIONS FOR VALID MUDARABAMUDARABA CONTRACT:
1. Capital should be known at the time of contract.
2. Capital should consist of cash in the form of currency/paper money. Commodities are not allowed as capital. Now a days, gold and silver have also become commodities.
3. Capital should be in possession of Saheb-ul-Mal to give it to Mudarib. Debt cannot constitute a capital for Mudaraba business.
4. Mudarib will handle the capital alone. Participation of the Saheb-ul-Mal in the work of mudarib will void the contract.
5. Share of profit should be determined as half, one third, or 30%, 40% etc. not as Tk. 30/- or Tk. 40/- so on.
6. Profit will be divided and loss will be born by the bank