Practical Application of Wadia’h in Structuring Deposit Products of Islamic Banks

Abstract

Wadi’ah is a shariah contract practically used by Islamic banks for structuring of deposit products. This paper asses the application of wadi’ah in structuring deposit products offered by Islamic banks by collecting information from the website and interviewing the officials of the chosen banks in Malaysia and Sudan. The outcome of the paper reveals that to adhere to the rules of shariah, it is imperative to move away from wadi’ah to qard in structuring of deposit products by Islamic banks. The existing practice of giving hibah in the form of cash or service must be stopped as it can be an additional benefit given to deposit account holders which may tantamount to riba as money kept for safe keeping with Islamic banks under the concept of wadi’ah is regarded as a form of fungible asset that must be construed as a qard contract. It is found that all Islamic banks in Malaysia need to reclassify current and saving account structured based on Wadi’ah to qard by 31st July 2018. It is hoped that the outcome of this research will assist the global Islamic finance fraternity to comprehend the existing practice of Islamic banks in this regard and will assist to appreciate the gradual developments of Islamic banking in the world.