 In this module, we would be trying to understand the application of Mudarabha in Islamic deposits or Islamic investment accounts. Normally we do not call Mudarabha based accounts as deposits, hence the better term is Islamic investment accounts. So Mudarabha based Islamic investment accounts, they are actually a central product in the context of Islamic banking on what we call liability side and we would look into it in some details. Profit sharing investment accounts, hankya. So profit sharing investment accounts, they are based on the concept of Mudarabha and the use of Mudarabha as a mode of financing. Okay, it may financing hoti nahi hai, lekin as a mode of finance Mudarabha use ho rahat. So there are two types of profit sharing investment accounts used by Islamic banks around the world, un mese ek hai, restricted profit sharing investment account aur dosta hai, unrestricted profit sharing investment account. In case of restricted profit sharing investment account, the bank restricts itself to certain activities in which it invests the money coming from profit sharing investment account. In case of unrestricted profit sharing investment accounts, the bank doesn't specify any activity, rather it has the liberty of using the money collected through profit sharing investment accounts into any legitimate activity which the bank is allowed to undertake. So there are two types of profit sharing investment accounts, restricted and unrestricted. How restricted profit sharing investment accounts work? First thing, the bank offers the profit sharing investment accounts to general public. Jab aap kisi bank mein jaate hai, tumah likha hota hai ki jiham profit sharing investment accounts offer karte hai. Aap bank ki website pe jayenge udhar bhi likha hoega. So that is actually deemed as offer of profit sharing investment accounts. Ab ye jo profit sharing investment accounts hote hai, inke terms and conditions are very well known. They are made available to the general public. Koi bhi offer terms and conditions ke baghair uski koi hasiyat nahi. So the bank makes the terms and conditions of profit sharing investment accounts known to the general public, either by way of putting those ENCs on their website or displaying in branches or giving the pamphlets and brochures to the people who would like to open a profit sharing investment account. So with the offer, the terms and conditions must be made available to the prospective profit sharing investment account holders. Now once the general public is made aware of the terms and conditions and they decide to open an account, then of course an account is opened and they agree to certain other terms and conditions as well. In case of restricted profit sharing investment accounts, the bank makes it available for the profit sharing investment account holders to know that where their money would be going to. For example, the bank can always say that the money thus collected in the form of profit sharing investment accounts would be used in car financing by the bank. If that is the case then the bank would not be allowed to use the money thus collected in any other banking activity. Which is not guaranteed. Remember in case of modarwa, we said that the capital cannot be secured and the return cannot be guaranteed. In this case, when the bank is offering modarwa-based profit sharing investment accounts, the bank only indicates that we may be able to generate a return of 10 percent, 12 percent, this is not guaranteed it is only indicative. So, this is very important an indicative rate of return. After understanding the terms and after having been satisfied with the terms and conditions, the profit sharing investment account holders, they open the account. The money from the profit sharing investment accounts is then pooled in what is called a modarwa pool and the money from modarwa pool is then used for financing of a specific activity as I said it could be car financing. We would look into distribution of profit in case of profit sharing investment accounts in our next segment. Once the activity in which the money from modarwa pool has been invested generate some profit that profit is distributed amongst the profit sharing investment account holders according to the pre-agreed profit distribution ratio and of course on a pro-rata basis. In certain cases the modarwa pool may have contribution from the shareholders of the bank i.e. the money may come into modarwa pool from shareholders equity in which case the shareholders of the bank would also be receiving their respective share in the profit generated by the investment activity financed by the modarwa pool. Let us exemplify this thing with the help of some numerics. In this example, we are showing one individual account holder who puts only one dollar into his profit sharing investment account. The total money shown in the modarwa pool is one million which means that a number of profit sharing investment account holders have actually put the money into this modarwa pool. This money which is shown here that is actually the money contributed by the shareholders of the bank. So this money has come from shareholders equity. So one million is the total size of the modarwa pool which is used for example in car financing. So all that one million is extended to those people who were looking for financing of cars. And if this activity generates profit of 250,000, so this modarwa pool actually then generates a return of 25%. So this is the return generated by the modarwa pool's investments. Let us see what happens next. And this money would then be divided amongst all those who contributed to the modarwa pool. The profit distribution ratio between the bank management and the holders of profit sharing investment account holders is 50%. So which means this gross profit of 250,000 would be divided between the bank, 125,000 going to the bank and 125,000 would be distributed amongst the profit sharing investment account holders. Now the indicative rate of return was 10%. However, profit sharing investment account holders they get a return or they face a return of 13.88% which is more than the indicative rate of return. So the bank would actually be putting only 90,000 in the form of a distributable profit and the remaining 35,000 that would go into an excess pool. This would make sure that this one person who put $1 into his profit sharing investment account would get 10% return which is equal to the indicative rate of return. Now next time if the profit generated by the modarwa pool's investments was only 150,000. In this case bank share would be 75,000. Profit sharing investment account holders share would be 75,000 which is a rate of return of 8.33% which is less than the indicative rate of return of 10%. In this case the bank would get 15,000 from the excess pool. 75,000 has been generated in the form of profit this time anyway. This would make this amount 90,000 which would be distributed amongst the profit sharing investment account holders which is actually the 10% rate of return equal to the indicative rate of return as displayed by the bank in the public domain. Now there are different practices of profit sharing investment accounts. In certain countries unrestricted profit sharing investment accounts as well as restricted profit sharing investment accounts are offered by the banks. There are no restrictions on the banks. In certain countries only restricted profit sharing investment accounts can be offered by the bank. So depending on which jurisdiction an Islamic bank is operating they would offer either a restricted profit sharing investment account or an unrestricted profit sharing investment account. But whatever be the choice one thing is for sure that these accounts would be based on the concept of Mudaraba. So this is one application of the concept of Mudaraba in the context of Islamic banking.