Islamic deposit insurance
A deposit protection scheme designed on Islamic lines to protect depositors of Islamic banks if a bank fails.
Islamic deposit insurance is a system with Islamic design features that protects depositors against the loss of their insured Islamic deposits if an Islamic bank fails, as the IADI-IFSB core principles describe it. Contributions are typically held in a separate Islamic fund, often structured on takaful or other compliant principles, and invested only in compliant assets. Whether investment accounts are covered varies by jurisdiction.
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
Islamic depositA deposit product whose principal the Islamic bank is obliged to repay, as distinct from an investment account that shares risk.Profit-sharing investment account (PSIA)An account whose funds the bank invests, usually as mudarib, with returns based on actual results rather than a promised rate.TakafulMutual cover: participants contribute to a common fund, as donations, to help one another against specified losses.Maqasid al-ShariahThe objectives of Shariah: protecting people's interests and averting harm, used to guide how rules are applied.