Islamic Banking Operations and Products
This domain covers the liability side and branch mechanics: how accounts are opened, how funds are pooled, and how profit is calculated, declared and credited. Questions often turn on weightages, profit-sharing ratios and the difference between a current account and an investment account.
Current accounts
A current account is a qard - a loan from the customer to the bank. No return is promised, though the bank may levy service charges. Overdrafts on interest are not permitted; a bank may extend qard-e-hasan or a financing facility instead.
Savings and term deposits
Savings and term deposits are usually unrestricted mudarabah (or wakalah) arrangements. Customer funds join an investment pool; the bank acts as mudarib; profit is shared on a pre-agreed ratio and allocated among account holders by weightages. Profit is declared after actual earning, never guaranteed, and losses are shared pro rata on capital unless the bank was negligent, breached its mandate or acted against Shariah.
Worked example
A pool earns PKR 10,000,000. The bank's mudarib share is 40%, i.e. 4,000,000, leaving 6,000,000 for investment account holders. A depositor holding 1% of the weightage base receives 60,000. If the pool instead lost 2,000,000, the bank takes no mudarib share and depositors bear the loss pro rata - 20,000 for that 1% holder - unless misconduct is established.
Traps
Do not credit profit to current accounts. Do not treat the published indicative rate as a contractual entitlement. Watch the sequence: gross income, bank's share, weightages, reserves, then distribution. Mixing shareholders' funds into the pool without allocating weightage, or charging pool expenses inconsistently with the declared policy, is a common exam error.