Application of Mudharabah for saving account in Islamic finance: (with special reference to Amana Bank Limited)

Abstract

Islamic finance is one of the fastest growing industry in the world. It has structured the banking and financial products and services within the parameters of Shariah. The Shriah compliant tools for financial transaction have been prudently designed by the scholars to offer the products and services. The Mudharabah is one of the tool which is employed by the Islamic financial institutions (IFIs) to provide various financial products and services. From the inception of industry Mudharabah has been used by the IFIs as an alternative mechanism for saving account. However, the modern it has been catered the interest of researchers whether the nature of Mudharabah fulfill all the features of saving account. In this regard there are number of challenges and issues are identified and those issues are rectified by the IFIs in their practices. On the other hand, some IFIs removed the Mudharabah from the operation of saving accounts. However, in Sri Lanka, many IFIs have practiced Mudharabah as a tool for their saving account. Therefore, this study has been carried out in order to find out whether the same challenges are still available at the IFIs in Sri Lanka. Amana Bank which is the pioneer in Islamic finance in Sri Lanka and the only fully fledged Islamic bank in the country has been selected as sample for this study. Qualitative method was employed to carry out this research. Primary data were gathered though interview and group discussion with banking professionals. Secondary data was obtained through research articles, website news, official websites of IFIs and the like. As the objectives of this study some challenges were found on the modern application of mudharabah in saving account. The researchers have put forward some recommended for the better usage of Mudhrabah saving account for future operations.