Resolution No.(53) by the Board of Iftaa`, Research and Islamic Studies:
“ Ruling on Awards Offered by the Islamic Bank in Accordance with a Particular Mechanism “
Date: 8/8/1422 AH corresponding to 24/10/2001 AD
Question: What is the ruling when the Islamic Bank offers incentive awards to clients, who have investment accounts, in accordance with a particular mechanism (volume of the account, duration, added sums, and stability of the account)? How can we define the relation between the above clients and the Islamic Bank in light of these awards: a contract or an independent initiative on the part of the bank? If it is a contract, is it binding or not?
Answer: All success is due to Allah.
The Board of Iftaa` is of the view that it is permissible for the executive board of the Islamic Bank to distribute cash or in-kind incentive awards on these clients, and to cover their expenses in Hajj (pilgrimage) or Umrah (minor pilgrimage)or the like, if it is entitled to do so, provided that these awards are covered from the bank`s own earnings.
Moreover, it is impermissible for the bank to cover these awards from the total of the investment profits because this entails giving a portion from the share of the owners of these accounts as a sort of contribution, and this is forbidden in Sharia because the Mudarib (bank) isn`t allowed to give from the money of the Mudarabah (co-partnership), except with the permission of the owners (clients who have investment accounts). If they allow that, then it is permissible for the bank to cover these awards from its overall profit. In this case, offering these awards is considered a donation/grant on the part of the bank, and becomes a binding promise if it had made an announcement about that earlier. In addition, it can`t be considered a condition in the Mudarabah contract between the bank and the owners of the investment accounts because some of them may receive awards; whereas, others may not.
In this case, the board of directors enjoys the authority to lay down the legal terms and regulations pertaining to giving these awards (volume of the account, duration, added sums, and withdrawals), and to determine the type of the investment account (savings, deferred etc.)eligible for that ,whether to all clients or to some of them.
Moreover, it isn`t permissible for the bank to distribute theses awards on the owners of current and call accounts for there is a suspicion of Riba (usury) similar to the ruling on loans because every loan that leads to a benefit is unlawful.
Based on the aforementioned, it is obvious that the relation between the Islamic Bank and the investors in light of these awards isn`t contractual, rather, it is an individual initiative undertaken by the free will of the Bank`s Administration. And Allah knows best.
Iftaa` Board
Chairman of the Iftaa` Board, Chief Justice, Izz Al-Deen Al-Tamimi
Dr. Mohammad Abu Yahia
Dr. Abdulsalam Al-Abbadi
Dr. Yousef Gheezaan
Dr. Wasif Al-Bakhri
Sheikh Saeid Hijjawi
Sheikh Na`eim Mojahid