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.
A profit-sharing investment account holds funds that the bank invests on the holders' behalf, usually under mudarabah, so that returns depend on investment results and the principal is not guaranteed. IFSB-22 sets out what banks should disclose to these account holders, including how profit is calculated and allocated and the reserves that affect their returns. Accounts may be unrestricted, pooled at the bank's discretion, or restricted to investments the holder specifies.
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
Unrestricted investment accountAn investment account whose funds the bank may invest at its discretion and commingle with its own in a pooled portfolio.Restricted investment accountAn investment account whose holder limits where, how or for what purpose the bank may invest the funds.Investment account holderA customer who places funds in an investment account and shares in its returns and risks, rather than holding a deposit claim.Profit equalisation reserveAn amount set aside from mudarabah income to maintain a level of return for investment account holders and the bank over time.MudarabahA partnership of capital and work: profit is shared by an agreed ratio, while financial loss falls on the capital provider.