How the deposit scoring or weight system work in an Islamic bank?

In-Depth Analysis

Once the amount for the overall distributable profit for a certain period has been determined, the Islamic bank shall arrive at the total amount it is entitled to receive as the Mudarib and the amount which is required to be distributed among Mudarabah depositors. As explained earlier, both amounts shall be based on a pre-agreed distribution ratio for the period. Some customers may have placed funds for the maximum period (say one year) while others for one or three months. The deposit amount by some customers may be large while for some others it may be just equal to the minimum threshold the bank has set to receive the term deposits. The question is, will it be fair to treat all types of deposit clients in the same manner? Being the Mudarib, it is the responsibility of the Islamic bank to attempt to get the best profit for the Rab Al Maal (fund provider). This approach not only benefits the depositors but also the Islamic bank. The mechanism is called the deposit scoring or deposit weight system through which the term deposits of different maturities are given certain weights. For example, a term deposit of a one-year maturity may be given 100% weight whereas a deposit of one month is allocated 40% weight by an Islamic bank. The weights signify the effectiveness of a deposit for the Islamic bank from a deployment perspective. Hence the higher the effectiveness of a deposit to the Islamic bank, the higher the share of the profit allocated to such a deposit. The weights allocated to each category of deposit must be approved by the Shariah board of the Islamic bank and must be advised to the customer at the time of the deposit placement. The practice of profit smoothing is also important: Islamic banks build the statutory reserve until it reaches the legally stipulated level of the paid-up capital out of its own share of the profit and not from the common pool profit. This is for the reason that the statutory reserve is the sole responsibility of the Islamic bank in its capacity as the corporate entity and not as the Mudarib.