Deposits and Savings Accounts
Islamic savings accounts — wadiah vs mudarabah
Islamic savings accounts operate under either wadiah (safe custody with discretionary hibah/gift) or mudarabah (profit-sharing investment account). Both are permissible; the mudarabah model is more aligned with Islamic finance principles.
Full Ruling
Two main structures: (1) Wadi'ah Yad Damanah (guaranteed safekeeping with bank discretion to invest): the bank guarantees the principal and may award a gift (hibah) at its discretion. The hibah is not contractually guaranteed and varies based on bank performance. (2) Mudarabah Investment Account: the depositor is the rabb al-mal (capital provider) and the bank is the mudarib (manager). Profits are shared in a pre-agreed ratio; principal is not guaranteed. The bank bears all losses unless caused by depositor negligence.
Rationale & Reasoning
Wadiah accounts remove interest by replacing the guaranteed return with a discretionary gift. Mudarabah accounts go further — they share genuine risk and return with the depositor, making them the ideal Islamic deposit structure.
Rule Basis (Daleel)
- 01Contract of wadiah (safe custody)
- 02Contract of mudarabah (profit-sharing investment)
Citations & Sources
AAOIFI Shariah Standard No. 17 – Investment Sukuk
AAOIFI · 2003
Ref: SS-17