Diversification of Islamic Financial Insturments
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Qard saving account
Saving accounts based on qard refers to the contract of lending money by a lender (depositor)
to a borrower (banks) where the latter is bound to repay an equivalent replacement amount to
the lender. Under this contract, there should not be any contractual benefits offered by a
borrower to alender unless it is based on the borrower’s discretion and is not made
conditional to the qard. In the case that the borrower wishes to grant lenders some amount of
return, the return may be granted as Hibah (gift) to the lender.
Mudarabah Investment Account
The investment account product is based on Mudarabah contract, which is profit sharing based
equity contract, the ratio is proposed by the Bank based on the market benchmark rate that
reflect the performance of the underlying assets, the ratio and rate that have been offered to
the customers are also benchmarked against rates by other competitors. Dividend Rates is
agreed upon upfront and the ratio is pre-determined at the initial stage of concluding the
contract. The difference between murabahah concept in term deposit and mudarabah in the
investment account is that, for mudarabah, the bank will determine the rate upfront and will
make it known to the customer since it is sale based contract, the rate is calculated based on
selling price, whereas for mudarabah contract, the indicative rate displayed is based on the
history/previous performance of the bank.
Fixed Rate Term Deposit
The fixed rate in Islamic Deposit is based on the contract commodity murabahah/ Tawarruq.
The product of fixed deposit involves buying and selling of commodity using Bursa Malaysia
Suq Al-Sila (BSAS). The selling price in the product of fixed deposit is fixed, where the Bank
needs to pay the fixed selling price, which reflects fixed return to the customer.
The list of deposit products for Consumer Banking is shown below.
Table 62: Deposit Instruments in Consumer Banking in Malaysia
Category Product Shariah Contract
Saving Account Saving Account Qard/Tawarruq
Current Account Current Account Qard/Tawarruq
Term Deposit Islamic Fixed Deposit Commodity Murabahah/Tawarruq
Source: Created by Author
Financing Products
Financing represent the deficit unit in the economic system, the Islamic bank offered various
facilities that benefit the customer needs. It includes home financing, vehicle financing, trade
financing and other services such as credit card, and others, below is short descriptions on the
most popular products in the financing side.
Home Financing
Home financing is financing product offered to the Islamic bank to finance the purchase of
property, residential and commercial, the home financing is offered based on different Shariah
contracts, as for the Home financing based on Equity or partnership basis, it is known as
Musharakah Mutanaqisah in which the Islamic bank and the customer will jointly purchase the