---
title: "What is Islamic deposit insurance? | IslamicOpenFinance™"
description: "A deposit protection scheme designed on Islamic lines to protect depositors of Islamic banks if a bank fails."
url: https://islamicopenfinance.com/glossary/islamic-deposit-insurance/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Prudential regulation](https://islamicopenfinance.com/glossary/#prudential)

Prudential regulation

# 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

- [IADI-IFSB Core Principles for Effective Islamic Deposit Insurance Systems, 2021: Definitions of key terms, Islamic deposit insurance](https://www.ifsb.org/wp-content/uploads/2023/10/IADI-IFSB_En.pdf)

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 deposit** A deposit product whose principal the Islamic bank is obliged to repay, as distinct from an investment account that shares risk.](https://islamicopenfinance.com/glossary/islamic-deposit/) [**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.](https://islamicopenfinance.com/glossary/profit-sharing-investment-account/) [**Takaful** Mutual cover: participants contribute to a common fund, as donations, to help one another against specified losses.](https://islamicopenfinance.com/glossary/takaful/) [**Maqasid al-Shariah** The objectives of Shariah: protecting people's interests and averting harm, used to guide how rules are applied.](https://islamicopenfinance.com/glossary/maqasid-al-shariah/)

**Prudential regulation**

1. [Capital adequacy (Islamic banks)](https://islamicopenfinance.com/glossary/capital-adequacy/)
2. [Displaced commercial risk](https://islamicopenfinance.com/glossary/displaced-commercial-risk/)
3. [Profit equalisation reserve](https://islamicopenfinance.com/glossary/profit-equalisation-reserve/)
4. [Investment risk reserve](https://islamicopenfinance.com/glossary/investment-risk-reserve/)
5. [Alpha factor](https://islamicopenfinance.com/glossary/alpha-factor/)
6. [Rate of return risk](https://islamicopenfinance.com/glossary/rate-of-return-risk/)
7. [Fiduciary risk](https://islamicopenfinance.com/glossary/fiduciary-risk/)
8. [Institutions offering Islamic financial services (IIFS)](https://islamicopenfinance.com/glossary/institutions-offering-islamic-financial-services/)

[All 221 terms](https://islamicopenfinance.com/glossary/)