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Deposits and accounts

Banking service fee

A fee for a banking service that involves no lending, charged as a lump sum or a percentage of the service's value.

A banking service fee is remuneration for a service that does not involve lending or borrowing, such as custody, acting as an agent to conclude contracts, handling subscriptions or leasing safe deposit boxes. AAOIFI's banking services standard allows such fees as a lump sum or as a percentage of the value of the service, because the institution is paid for work that benefits the customer. The line to watch is between a fee for a real service and a charge that is really a price for credit: AAOIFI's murabaha standard, for example, does not allow a fee for providing a credit facility.

Sources

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

Related terms

Ujrah (fee)A fee, wage or rent paid for a service, an agency or the use of an asset; the price side of ijarah and paid wakalah.Current account (Islamic)A repayable-on-demand account that AAOIFI treats as a loan to the bank, so the holder is owed the balance and no stipulated benefit.Paid agency (wakalah bil ujrah)An agency in which the agent is paid a fee; the fee must be known, and the arrangement follows the rules of ijarah.Documentary creditA bank's written undertaking to pay a seller, on the buyer's instruction, against presentation of stipulated documents.