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The financing assets of the Islamic bank are grouped in


different Investment Pools with respect to the source
of funds.

General Types of Investment Pools

1. General Deposit Pool (PKR & FCY)


2. Treasury / Financial Institutions (F.I.) Pool
3. Islamic Export Refinance Pool (IERS) Pool
4. Equity Pool
5. Specific Customers¶ Pools
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`t the time of disbursement, each asset must be properly


assigned to a specific pool at General Ledger or Sub-GL
level.

This can also be done with the help of an internal non-


financial entry.

The proper allocation of financing assets implies that


related risk and reward (Profit or Return) of the asset are
clearly linked to a specific pool and at any point in time
the asset¶s identification in terms of which pool it belongs
to, is determinable
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` pool will composed of all financing assets booked by


utilizing funds from the pool.

To make the periodic redemption of investment and profit


payment to pool participants possible, at any stage the
assets of the pool shall constitute at least 10% fixed
assets (like Ijarah or fixed asset Musharakah etc).
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Deposit Pools are made up of funds received from


customers in remunerative schemes such as

‡ Saving `ccount,
‡ Certificate of Islamic Investment (COIIs)
‡ Term Deposit `ccount
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Funds from financial institution (FI) can be accepted in


these pools under the mode of Musharakah or
Mudarabah.

`t maturity, normally these F.I. Pools are dissolved and


assets are transferred back to other investment pools.

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The Equity Pool consists of funds from the Bank¶s equity.


The funds are primarily invested in permissible equities &
other permissible Islamic modes. The equity pool may
also utilize the funds received from non-remunerative
deposits.
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  ° °    

Specific Customers¶ Pools are made up of funds received


from customers under some special arrangement either
on Musharakah basis or on Mudarabah basis.

The funds from these pools are invested under Islamic


modes of finance.
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Deposit: Ijarah/Car 1500 MN


General PKR 4000 MN Murabaha 2000 MN
Cash 500 MN
Ijarah 100 MN
FX 300 MN Murabaha 200 MN

Specific PKR 700 MN Ijarah 200 MN


Murabaha 500 MN

Ijarah 100 MN
F.I.: PKR 500 MN Murabaha 400 MN

Ijarah 100 MN
SBP: PKR 1500 MN Murabaha /IERS 200 MN

Ijarah 200 MN
Equity: PKR1000 MN Murabaha 400 MN
Investment 400 MN

Total PKR 8000 MN Total 8000 MN


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‡ The bank allocates the funds received from the


customers to a deposit pool.

‡ These funds from the pool are utilized to provide


financing to customers under Islamic modes that include,
but are not restricted to, Murabaha and Ijarah.
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- The bank calculates the profit of the deposit pool every


month.

- Gross Income (Return) of the pool will be calculated by


taking all the assets booked upto the beginning of the
month as well as assets booked/investments made during
the month by utilizing the funds from the Investment
Pool.

-The Gross Income of the pool will be announced on a


monthly basis.

-The profit will be calculated by 5th of each subsequent


month for the previous month.
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The Gross Income will be shared between the bank (as


Mudarib) and Depositors (Rabul Mal) in a predetermined
ratio (%) of the actual profit earned.

This ratio of profit for bank & Investment Pool (for


depositors) is announced

‡ at the beginning of the month and


‡ is available at the website of the bank or
‡ can be obtained from the bank upon request.
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Example

Bank (as Mudarib) Upto X % 50 %

Investment Pool (For (1 ± X) % 50%


Investors)
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Bank¶s share = Gross Income x (X%)


Investment Pool¶s share = Gross Income x (1-X)%

`t the time of profit sharing, bank (as Mudarib) on its


sole discretion can reduce its share of Income in order to
pass benefit to the Investment Pool (depositors).
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The profit is distributed among the customers/account


holders on the basis of predetermined weightages,
announced at the beginning of the month, based on
their respective category/tiers.

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In case of any loss, it will be shared by the members of


Investment Pool in ratio of their investment.
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The Investment Pool operates on Musharakah basis.

Different categories of depositors in the Investment


Pools are assigned different profit sharing weightages
based on:

-Investment tenure
-Profit payment option
-`mount tiers

These profit weightages are announced at the


beginning of the month.

The bank can also participate in the Investment Pool


(as an investor) in any proportion.
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Investors Categories Weightages

Saving `ccount Tier 1 ( upto 100K) 0.23

Saving `ccount Tier 2 (above 100K) 0.42

Term Deposits± 1 year maturity 1.36

Term Deposits± 3 years maturity 1.69

Term Deposits± 5 years maturity 1.83

Equity (bank) 1.83


°  ! #    !     
Depositors
¢ab-ul-Mal
Profit share
EGIBL
Weightage System

Mudarib
Profit Share
Gross Profit

Pool of Funds

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Businesses/Corporates
Premium Payment
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Premiums are offered to stimulate higher deposit


mobilization from high net-worth clients in addition to
the normal share of profit.

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The administrative and operating costs associated with


high value investments are lower; therefore bank
passes on the advantage of these lower costs to high
net worth investors to induce them to bank with MBL.
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-Premiums are declared by the bank from its share of


income as a Mudarib voluntarily and will be paid only if
overall pool has earned profit.

-Total premium paid cannot be more than 50% of the


bank¶s share of profit as a Mudarib

-MBL has unilateral right to reduce/withdraw premium


offer.

-Premium may be calculated as a percentage of


investment.
Working for Weightages
 *$*

Following factors complicate the profit sharing


mechanism of Musharakah Pool:

-Large number of partners (`ccount holders)


-`ccount holders continually join and leave the
Musharakah pool
-Investment of `ccount holders also fluctuates

Simple profit sharing mechanism with this continual


fluctuation of investment and profit ratios is impractical
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