Shariah Compliant Fiduciary Deposit
Shariah Compliant Fiduciary Deposit Meaning:
This is a type of fiduciary deposit that meets the requirements of the Shariah law based on the Quran. Shariah complaint fiduciary deposits are guided by the principle that all transactions are based on tangible assets and do not incur any interest, which is prohibited in Shariah law. Shariah principles also forbid uncertainty, speculation and gambling. The bank generally holds a Shariah compliant fiduciary deposit and will invest funds in Shariah compliant term investments, on behalf of the depositor. The depositors then share the profit accrued in a Shariah compliant manner.
This is a type of fiduciary deposit that meets the requirements of the Shariah law based on the Quran. Shariah complaint fiduciary deposits are guided by the principle that all transactions are based on tangible assets and do not incur any interest, which is prohibited in Shariah law. Shariah principles also forbid uncertainty, speculation and gambling. The bank generally holds a Shariah compliant fiduciary deposit and will invest funds in Shariah compliant term investments, on behalf of the depositor. The depositors then share the profit accrued in a Shariah compliant manner.
Many banks have Islamic banking divisions and offer Shariah compliant fiduciary deposit services based on the Islamic principles of Mudarabah and Wakalah, where the bank acts as an as the depositor’s agent or as the depositary to invest the depositor’s funds in certain investments, without violating Shariah laws that strictly ban interest and monetary speculation.