Islamic Banking Muḍārabah Review from Depositors’ Funds Security Perspective

Islamic banks use Muḍārabah to collect money into their saving and term deposit investment accounts. While doing so these banks stipulate in their terms and conditions that the customers as money providers will solely bear the loss. The banks who manage these funds will neither bear the loss, nor guarantee these funds. Additionally, the customers have no course to the profit distribution or investment decisions. The banks quote that these terms and conditions are in line with Muḍārabah Sharῑ῾ah principles. On the contrary, they use the same terms and conditions as an excuse for not providing financing to the customers based on the Muḍārabah. This double standard draws attention of the researchers to analyze the situation with the aim to protect the depositors in Islamic banks. This is a qualitative study that used unrestricted interview methods to collect data. It was found from research that the current banking Muḍārabah has been altered completely and that the banks don’t qualify to continue using same loss terms and conditions. It is inevitable for the financial and social safety of society to update the Muḍārabah terms and conditions to make them comply with Maqāṣid al Sharῑ῾ah. The study recorded the view of few scholars; however, it opened the doors for Islamic banks, regulators and Fiqh councils to further discuss the legitimacy of the banking Muḍārabah terms and conditions to protect relationship with the customers who deposit money in trust of being Islamic and to avoid the usury offered by the interest based conventional banking.