Al-Baraka Islamic Bank introduces new interest-free monthly payment scheme

Al-Baraka Islamic Bank has notified its customers of an interest-free money payments scheme that is tailored to the Islamic Shariah. The investment scheme is called Al-Baraka Murabaha Islamic Investment Account (AMI) and is a joint pool account for three-year investment. It can be subscribed with a minimum account of Rs 50, 000 without an upper limit.

The officials at the bank said that the scheme had the clearance of Dar-ul-Iftah, the Centre of Economics and Dar-ul-Uloom at Karachi.

It is open for investment by individual account holders, firms, companies, hospitals, schools, universities and educational institutions that wish to make deposits in "conformity with the principles of Islamic Shariah".

The scheme, instead of a fixed return, carried a pro-rata profit actually earned by the AMI Joint Pool Account. Therefore, neither the principal nor a rate of profit (tied up with the principal) was guaranteed. But of course one could expect good and safe returns.

The ratio of profit sharing between the account holders and the Al-Baraka stood at 70 percent to the investors and the remaining for the Mudarib (the bank). However, this percentage shall be subject to review at the beginning of new Gregorian year and the bank may at its discretion "give additional profit from its share to the investors".

The scheme protects the investors against responsibility for any losses on account of the "negligence or mismanagement" of the bank. In such a case the bank, the details of the scheme added, will add its share in the profit.

However, if the loss was not due to "negligence" the investor will, under the Islamic principles, share in the losses.

Provisional profits on Joint Pool Accounts, was payable on monthly basis subject to the final declaration of profit for investment of half yearly period, which are from January to June and July to December each year.

In addition, the institution promises to free services to the investors on all inter-bank funds transfer, which means within the Al-Baraka branches, stop payment or other standing interaction services and hold mail services or balance confirmation certificates.

These services, which used to be a part of banking services, have now become chargeable to the account holders and different banks have different rates. A number of banks have fixed a minimum limit on the maintenance of balances for savings accounts that in some cases is as high as Rs 10, 000.

These are a deterrent for the low and middle class salaried persons who get paid through cheques or bank transfers