Practical challenges of Mudarabah deposit in Islamic Financial Institutions in Sri Lanka

Abstract

All products and services in Islamic Financial Institutions are structured with the support of Shariah compliant commercial contracts. Accordingly, deposit accounts in IFIs are also being backed by Shariah contracts such as Qard, Wadiah, and Mudarabah. These are contracts suggested by the scholars with some Shariah-compliant modifications to have similar attributes of conventional deposits. Thus, I have to practice according to Islamic commercial law as well as be competitive with its conventional counterpart. This study intended to identify the practical challenges faced by IFIs with respect to Mudaraba deposits. The qualitative research method has been employed in this survey. Primary data were gathered through interviews and secondary data were gathered from available library sources. Three Islamic finance institutions were chosen as samples, each representing a different type of Islamic financial an institution in Sri Lanka. The study found that Islamic financial institutions face certain challenges while applying Mudaraba contract to deposit such as Rate issue, CBSL restrictions and rules, lack of awareness about the products from both customers and staff, lack of technologies, Non-compliant deposit fund,s and the like