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After deduction of the direct expenses the remaining profit is shared with the investors and the bank on pre-agreed fixed ratios. The profit of the bank is called Mudarib’s profit and the profit of the Depositor is called Rabbul Mal or Investor’s profit.
•
The Investor’s profit is sub divided into various ratios/weightages on the basis of following procedure: 1) A specific weightage will be allocated to the different types of investors/depositors, according to the maturity and/or investment profiles, at the beginning of each quarter. 2) Distribution/Declaration of profit at the end of each period will be done in accordance with the pre agreed weightages.
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3) In case bank also invests in the pool of assets, a specific weightage would also be assigned to it and the bank would become a partner/investor as other investors/depositors.
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4) At the end of each period, the profit is distributed/declared according the pre agreed weightages.
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5) The investors are allowed to redeem their investment any time by selling their share to the bank at the value agreed at the time of redemption. (A minimum period can be set by the bank before which no redemption would be allowed). Many financial institutions finance the working capital of an enterprise by opening a running account for them from where the clients draw different amounts at different intervals, but at the same time, they keep returning their surplus amounts. Thus the process of debit and credit goes on up to the date of maturity, and the interest is calculated on the basis of daily products.
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Running Musharakah Account On The Basis Of Daily Products
138
Can such an arrangement be possible under the Musharakah or Mudarabah modes of financing? Obviously, being a new phenomenon, no express answer to this question can be found in the classical works of Islamic Fiqh. However, keeping in view the basic principles of Musharakah the following procedure may be suggested for this purpose: •
A certain percentage of the actual profit must be allocated for the management.
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The remaining percentage of the profit must be allocated for the investors.
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The loss, if any, should be borne by the investors only in exact proportion of their respective investments.
Islamic Finance | Reference Book 1