What is the ruling of Sharia on the joint investment account in Al-Rajhi Bank as per the attachment?
All perfect praise be to Allah the Lord of The Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.
The joint investment account in Islamic Banks is considered a Mudarba contract* between the depositors and the bank whereby both parties agree on a proportionate share in profit. During its thirteenth session, the International Islamic Fiqh Academy issued a resolution whereby it framed the investment account as a joint Mudarabah contract in which there is multi-capital providers (Arbab-ul-mal). This resolution stated: "This joint Mudarabah is based on the view of the scholars who decided that it is permissible to have multi-capital providers and that the Mudarib (working partner) can also be a provider of capital. It is also a form of lawful Mudarbah, if the rules of Sharia are observed in this regard….."
Having reviewed the attached system of joint investment account, it was found out that there is an expected percentage of profit for the fourth quarter of this year with the possibility of increase or decrease. In addition, it is permissible to have an expected rate provided that the depositor and the bank agree on a profit percentage, such as a quarter or a third, to be determined at the beginning of the contract.
In conclusion, there is no sin in investing in the above account offered by Al-Rajhi provided that a fixed proportionate share in profit is agreed on at the beginning of the contract. And Allah the Almighty knows best.
*The term refers to a form of business contract in which one party brings capital and the other personal effort. The proportionate share in profit is determined by mutual agreement. But the loss, if any, is borne only by the owner of the capital, in which case the entrepreneur gets nothing for his labour. The financier is known as ‘rabal-maal’ and the entrepreneur as ‘mudarib’. As a financing technique adopted by Islamic banks, it is a contract in which all the capital is provided by the Islamic bank while the business is managed by the other party. The profit is shared in pre-agreed ratios, and loss, if any, unless caused by negligence or violation of terms of the contract by the ‘mudarib’ is borne by the Islamic bank. The bank passes on this loss to the depositors.