www.tjprc.org editor@tjprc.org International Journal of Business Management & Research (IJBMR) ISSN(P): 2249-6920; ISSN(E): 2249-8036 Vol. 4, Issue 2, Apr 2014, 81-92 © TJPRC Pvt. Ltd. THE CONCEPT OF MUDARABAH INVESTMENT DEPOSITS RUSNI BT HASSAN 1 & SHAFI‘I ABDUL AZEEZ BELLO 2 1 Associate Professor, Department of Islamic Law IIUM, Institute of Islamic Banking and Finance, Tamil Nadu, India 2 Postgraduate & Research, Ahmad Ibrahim Kulliyyah of Laws IIUM, International Islamic University, Malaysia ABSTRACT Islamic finance is emerging as a rapidly growing part of the financial sector in the Islamic world as it has become a global phenomenon. Moreover, both Islamic and western countries have been embraced it. The mudarabah contract refers to an agreement made between a capital provider and another party who acts as the entrepreneur. Therefore, this paper attempts to analysis the concept of mudarabahin investment deposit. The characteristics of Investment deposit in both banks was briefly explained while its classification critically analysis. Furthermore, the mudarabah deposit and its categories mainly clarify. Also, the essential elements, condition of mudarabah and calculation of profit were elicited. In addition, the basis from primary and secondary sources was given to authenticate the practice of mudarabah. The explanation of guarantee returned in mudarabah, administrative costs, indirect expenses, modus operandi as well as difference between mudarabah and musharakah were shortly enlightened. It concluded with results. KEYWORDS: Mudarabah, Investment, Deposit JEL Classification: G21 _ G28 _ K12 _ K41 INTRODUCTION Investment deposits represent the case when owner of funds for seek a return on their funds, and are willing to spare these funds for an agreed period. Moreover, is the third category of deposit facility and is for those who keep money for investment motives. Customers who have idle funds usually want better returns. 1 Investment deposits are Islamic banks’ counterparts of term deposits or time deposits in the conventional system. They are also called (PLS) Accounts or Participatory Accounts. However, they can be distinguished from traditional fixed term deposits in the following manner: • Fixed term deposits in the conventional system operate on the basis of interest, while investment accounts in Islamic banks operate on the basis of profit sharing which is a straightforward (mudarabah). Mudarabahis where the provider of the funds, ‘the saver’ entrusts their money to an expert the investor, ‘the bank’ so that they can make a profit from it. Instead of promising depositors a predetermined fixed rate of return on their investment, the bank tells them only the ratio in which it will share the profits with them. How much profit each depositor earns depends on the final outcome of the bank’s own investment. 1 Lee Mei Pheng & Detta Ivan Jeron, Islamic banking & Finance Law, (Selangor: Pearson Longman, 2007), at 67.