Back To Wadiah

Investment Account Guidelines

True to form, BNM have called for an urgent discussion with the industry players on the implementation of the IFSA. The message is very simple; industry players are given time to comply to the IFSA i.e. no later than 30 June 2015. During this time, we are asked to either:

  1. Retain Mudharabah and Wakala structures to comply with the Investment Account guidelines; or
  2. Move the Mudharabah and Wakala structures into an alternative structure.

Obviously no one has the answer to both options. Especially for Current Account and Savings Account now offered under Mudharabah. To retain a simple product such as Savings Account under Mudharabah, the Bank needs to comply with tedious risk profiling of customers and numerous disclaimers on investments. Customers will be confused by this arrangement, and we foresee many will stay away. Marketing wise, it is a nightmare. Operationally as well, if we were to comply with the investment disclosures. Gone will be the simple structures that customers are used to.

Bringing the Current Account and Savings Account into Commodity Murabahah structures is the most viable solution in Shariah’s perspective. However, operationally tedious, money required for system development, revised documentation and more importantly, building customer awareness and acceptance will be the main challenges for the industry to move to this alternative.

Committees were promptly set-up to discuss solutions, and as expected, there can be no commercial viability into moving to Commodity Murabahah, at least not in such a short period of time. For Time Deposits it is possible, but how to address the daily deposits and withdrawals of funds in a Current or Savings Account under Commodity Murabahah?

The easy solution; take a step backwards.

Wadiah is suddenly the solution. Most Banks has decided to migrate back into Wadiah structures, even with limited value proposition. Hang on, this is not the solution. Perhaps only workable for a short term stop-gap measure, but definitely not feasible for moving forward, especially when there is a conventional banking alternative.

Wadiah is definitely not the solution for deposit building. But then, what else is there? Until someone comes up with a brilliant solution, we will have to make the best of what Wadiah has to offer.


3 thoughts on “Back To Wadiah

  1. I’m aware that KFH (Malaysia) has decided as of 1 Jan 2014 to ‘covert’ its all of it GIA to International Commodity Murabaha.

    Curious as to whether or not any Islamic banks in Malaysia have notified their customers that they will do the same? Please share if you have the info.

    (Islamic banker in GCC)


    • The deadline for the Banks in Malaysia to either comply with the Investment Account guidelines for GIA Mudharabah or offer a new product not categorised as investment is 30 June 2014. Some banks have ready products based on International Commodity Murabahah for their GIA and therefore demise the Mudharabah based products. However, most banks are still offering Mudharabah GIA until the 30 June 2014 deadline but slowly demise the longer tenure placements to avoid the GIA maturing after 30 June 2014. In the meantime, most Banks will be moving to Commodity Murabahah structures by 1 April 2014, and I imagine customers will be informed accordingly by banks within this first quarter before 1 April 2014.


  2. Pingback: Concept Paper on Liquidity Coverage Ratio | Islamic Bankers : Resource Centre

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