CONTRACT OF WADIAH

MD. SAJID HASAN

AHMAD BIN MAHFUZ

NAHID HASAN

UMAR ALI

Group member’s name

WHAT IS WADIAH?

Wadi‘ah Yad al-Amanah (Act of Trust)

Wadi‘ah Yad al-Damanah (Safekeeping with Guarantee)

TYPES OF WADIAH

Wadi‘ah Yad al-Amanah (Act of Trust)

Practices of Wadiah in Islamic Banking

Savings Account -Meant to serve the needs of customer surplus-Also for customers to get a return from these deposits-The principal amount of the deposit is guaranteed-The customer can withdraw his amount at any given time-The customer permits the bank to use the deposits in its investments-Returns may be given to the customer in the form of hibah – gift, which is at the discretion of the bank -Such deposits are used in short-terms projects, which are normally risk free and the returns are relatively lower

Savings AccountBank Islam Malaysia Berhad describes savings deposits in the following way:

“The Bank accepts deposits from its customers looking for safe custody of their funds and degree of convenience in their use together with the principle of Al- Wadi‘ah. The bank requests permission to use these funds so long as these funds remain with the bank. The depositors can withdraw the balance at any time they so desire and the Bank guarantees the refund of all such balances. All the profits generated by the Bank from the use of such funds belong to the portion of the Bank. However, in contrast with the current account, the Bank may, at its absolute discretion, reward the customers by returning a portion of the profits generated from the use of their funds from time to time.”

Savings Account Bank Islam - Wadiah Savings Account.

Age requirement: Open to all, 12 years and above

Types of Account: Individual Account(12years old and above) Trust , Entrust account(for children under 12 years old opened with an individual adult), Joint Account, External, Association, Societies

Contract: Wadiah

Benefits: Token (hibah), which is given every month based on Bank’s discretion, Free savings passbook, Bankcard facilities, Salary crediting etc.

Wadi‘ah Yad al-Damanah (Safekeeping with Guarantee)

Current AccountThe Islamic Bank mobilizes customers· to deposit into its Current Account package under the principles of Al-Wadi·ahYad Dhamanah (guaranteed custody).

-The bank guarantees the full return of these deposits on demand -The depositor is not paid any share of the profit or any other return in any form.-Depositors authorize the bank to utilize their funds at the bank’s own risk

-Usually account holders have a right to draw cheques on their accounts.

Bank Islam - Wadiah Current Account

• Minimum opening: Minimum RM500.00 initial deposit for individual account and RM1,000.00 for non-individual account. Introducer is also required.

• Age requirement: Open to all, aged 18 and above

• Types of Account: Individual Account, Joint Account, Partnership Account, Government Account, Association Account, Private Company Account and Company Account

• Contract: Wadiah

• Benefits: Token (hibah), given every month based on Bank’s discretion, Free cheque book holder, Bankcard facility (for Individual / Joint account & Private Company Account Only), Salary crediting etc

Issues on Amanah and Dhaman The original ruling in the Shariah is that wadiah is that it is a

− trust (amanah)

− righteous act (qurbah) which is encouraged and rewarded

− no agreement of guarantee because it is a pure amanah

− issue of replacement/warranty should follow a weakness from the keeper or custodian. This is in accordance to the saying of the Prophet (SAWS): ((ليس على المستودع غير المغل ضمان ))

“There is no compensation on the keeper who is not negligent.”

Issues on Amanah and DhamanSome situations amanah changes to dhaman? Below are some of these situations:

-Where the custodian - wadi’ forfeits from keeping the wadiah.

-When the wadi’ gives the property to a third party to keep the property without any necessity.

-Using the property-Traveling with the property-Denying the wadiah contract-Putting the property together with another property-Refusing to follow the instructions of the owner

Another important thing is that the bank give promises (not in contract , only verbally ) to customers to give them return or gift in future.

For example : the bank gives promise for those who deposit minimum 10K R.M , after 6 months , the bank will give them 6% return

. In this condition , there are two problems

1.The bank should never give the customer promise for return .

2.The bank does not give those who deposit less than 10K R.M return

Another issue is that , It's a loan; depositor is the lender, the bank is the borrower.some financial institutions in this country such as Bank Islam, Bank Muamalat and Maybank apply wadi‘ah contract to current and savings accounts. The contract (‘aqd) is between the owner of the asset (customer) and the custodian (bank) to safeguard the asset on behalf of the customer and at the same time the bank can use the asset for investment. Thus, the jurists suggest that qard or loan instrument for current account and mudharabah instrument for the saving andfixed investment account are more appropriate to be applied.

This can be justified by that , The depositor who deposits the money in a bank knows that the bank will actually mix up the deposit with other money and will utilize and invest the money. The depositor may give consent to the bank to utilize his money. This takes the hukm of qard and not wadi‘ah (safe keeping).

ConclusionIn the modern practice of Islamic banking all the above mentioned issues are present. In the original wadi‘ah, if the trustee discharges his duty as prescribed under Islamic law is not liable for any loss or damages to the deposited item.

On this note the modern application wadiah is more likely to be considered as loan given to the bank and if that should be the case, the principles involved in the qard should be strictly applied.

Thank You