Islamic Deposit

Islamic Deposit Meaning:
Islamic deposits form the basis of financial strength for Islamic banks, employing them in accordance with the Shariah law. They use these deposits to finance operations and increase profit for the shareholders. In Islamic finance, depositors are compared with conventional investors or shareholders, who earn a dividend when the deposit or investment makes a profit. Similarly, they may also lose a proportion of their capital, if the deposit posts a loss.

Islamic Deposit Example:
Islamic deposits may be based on Mudarabah and Wakalah structures. The agreement between the depositor and the Islamic banks does not indicate a specific rate of return. It merely sets the ratio in which profits and losses may be distributed between the parties of the contract. Different tenures may be chosen, as mutually agreed by both parties. Islamic deposits enable depositors to earn profits that are compliant with Shariah laws. On behalf of the client, the bank will invest the client´┐Żs deposit in Shariah-compliant companies and investment funds.