CONTRACT OF WADIAH

Wadiah is a contract ( akad ) between the owner of goods and custodian of the goods. To protect the goods from being stolen, destroyed etc. To ensure the safe custody of the goods Operates under the contract of Wadiah Yad Dhamanah (guaranteed custody). The bank accepts deposits from its customers looking for safe custody and convenience. The bank requests permission to make use of the customers funds for investment purposes.
Application of the contract of Wadiah

The customers may withdraw their balances at any time. Profit generated from the use of theb customers funds belongs to the bank. However, the bank may at its absolute discretion rewards the customers by declaring profits to them.
DISCRETIONARY REWARD Under the contract of Wadiah, the custodian i.e. the Bank is not allowed to mention or to promise any reward on the deposit received. The owner/depositors too cannot demand any rewards or return from their Bank on their savings. Wadiah is purely a contract on safe custody of goods without any promise on rewards or returns.
Application of the

CONTRACT OF QARDH
Qardh literally means a debt or loan without interest. There should be no promise of return or reward either by the borrower or the lender. The Bank may use an appropriate portion of its fund to provide benevolent loans to certain selected customers. This is an act of social responsibility to help a person who is in need. The borrower is obliged to pay only the principal amount of the loan. The Bank cannot demand the borrower to pay anything above the principal loan amount.
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CONTRACT OF MUDHARABAH
Mudharabah is a contract between two parties, i.e. the owner of the capital and the entrepreneur. The depositor, who is the owner of thev capital places a specified sum of money with the Bank, (who acts as the entrepreneur) for the purpose of participating in the profits made from the utilisation of the fund. Operates under the contract of Mudharabah (Trustee Profit Sharing). The Bank accepts deposits from its customers looking for investments opportunities. The customer is the Capital Provider, while the Bank acts as the entrepreneur. Both parties agree with the profit distribution / sharing ratio.
Application of the

The customer does not participate in the management of the funds. In the event of a loss, the customer bears all the losses. Profits generated from the use of the customers funds will be distributed according to the predetermined ratio.
Types of Mudharabah

In term of the powers / authority given to the entrepreneur, Mudharabah may be categorized into 1. Unrestricted Mudharabah 2. Restricted Mudharabah
Application of the contract o

CONTRACT OF MURABAHAH
Murabahah means cost plus mark-up sale. Based on this contract, the bank may finance customer who wishes to acquire an asset by purchasing the said asset from the developer/vendor and subsequently sells to the customer. The customer is allowed to settle the payment of the asset by installment within a pre-agreed period. 1. The customer identifies the developer/vendor and the asset he/she is interested to purchase. 2. The customer would then approach a bank for financing. 3. The Bank will first determine the requirement of the customer in relation to the amount of financing, the period and the manner of payment, etc. Application of the contract of 4. The Bank purchases the asset from the vendor / developer. 5. The Bank subsequently sells the asset to the customer at the Banks Selling Price, which comprises :i. the actual cost of the asset and; ii. the Banks margin of profit. 6. The Bank allows the customer to settle the payment by installments within the period and in the manner so agreed. Application of the contract o

CONTRACT OF IJARAH
Ijarah means lease or rent. Generally, the contract of Ijarah means selling of the benefit or use or service of an asset, for a fixed price or wage. Leasing is contract between a lessor and a lessee for the lease of an equipment which is chosen by the lessee from a supplier or manufacturer. Lessor retains beneficial ownership to the equipment. Lessee has possession and use of the equipment through payment of rentals over a stipulated period of time.

CONTRACT OF MUSHARAKAH
Musharakah is a general partnershipwhereby two or more parties enter into a contract to exploit their labour and capital jointly and to share the profits and loses of the partnership.