Deposits : Wakalah Fi Istihmar

  • Contract : Wakalah Fi Istihmar
  • Definition : Agency for purpose of Investment
  • Transaction : Service
  • Category : Investment
  • Secondary contract : Nil
  • Commonly used for : Savings Account, Current Account, Fixed Deposits, Structured Investments.

The Wakalah investment structure was introduce to bridge the gap between what customers usually see in a conventional Fixed or Term Deposit structure (where “interest” is fixed upfront) and an Islamic Mudharaba investment account (where actual profits are distributed based on an agreed ratio and therefore cannot be fixed). Via the contract of  Wakala, a Bank is able to specify an expected return from the deposit received from customer (indicative “fixing” of returns) by investing as the customer’s wakil (agent)  into selected instrument for an agreed wakil fee. The Bank (Wakil) makes the investment to generate specific returns, carried out for and on behalf of the customer (Muwakkil).

Types of Mudarabah2

The Muwakkil specifies the returns expected from the investment, and the Wakil is required to source an investment that is able to deliver the expected returns, after deduction of the Wakil’s agency fees. Any profits exceeding the agreed returns after deduction of the agency fee will be retained by the Wakil as additional incentive.

As in any type of investment product, the Muwakkil shall bear all risks associated with the placement made by the Wakil except those risks resulting from the Wakil’s misconduct or negligence.

Wakalah Investment


1 thought on “Deposits : Wakalah Fi Istihmar

  1. Salaam Mr. Amir,

    You have nicely explained about the Wakalah contract from Deposit side. Thanks for that!! 🙂

    But just wanted to know about the Wakalah Financing. The process flow of it and how is the customer generating it’s agency fee under the contract? How is the profit generated by the banks by raising Wakalah financing to customers? Because I have read that some banks are using Wakalah Financing as one of their financing product.

    Can this Wakalah financing be used as Working Capital financing?


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s