Interbank investment wakalah
An interbank placement in which one bank invests another's funds as agent for a fee, targeting an expected but not guaranteed profit.
An interbank investment wakalah is a placement in which one institution appoints another as its agent to invest funds for a fee. The agent targets an expected profit rate and may keep returns above it as an incentive, but it does not guarantee the principal or the profit except in cases of misconduct, negligence or breach. IIFM publishes an Inter-Bank Unrestricted Master Investment Wakalah Agreement to standardise such placements.
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
Wakalah bil-istithmar (investment agency)Investment agency: the agent invests the principal's funds for a fee, and the profit or loss belongs to the principal.Commodity murabahaInterbank and treasury deals in which commodities are bought and sold on deferred payment to place or raise short-term funds.WakalahAgency: one party appoints another to act on its behalf, with or without a fee.