The PRIMARY OIC ruling behind the halal INVESTMENT / SAVINGS account — the International Islamic Fiqh Academy (OIC), Resolution No.
The PRIMARY OIC ruling behind the halal INVESTMENT / SAVINGS account — the International Islamic Fiqh Academy (OIC), Resolution No. 123 (5/13), 'Qirad or Joint Muḍārabah in Financial Institutions (Investment Accounts)', adopted at the Academy's 13th session in Kuwait City, State of Kuwait, on 7–12 Shawwāl 1422H (22–27 December 2001). Where Resolutions 40-41, 110 and 136 anchor the three HOME-FINANCE contracts, this anchors the other half of a riba-free financial life — where your money SITS and GROWS. It defines what a Shariah-compliant investment account actually is: the bank is the working partner (Muḍārib) investing pooled depositor funds, not a borrower paying interest — 'the relation between him and the owners of the funds is Muḍārabah (Qirad)'. From that one fact flow the concrete reader-tests below: no principal guarantee from the bank, profit as a specified SHARE not a fixed rate, loss borne by the capital, and the bank's overheads paid from ITS profit share, not skimmed off the pool.
What this source says
A riba-free financial life has two halves. One is how you BUY — the home-finance contracts this corpus already anchors on primary OIC rulings (murabaha to the purchase orderer on Resolution No. 40-41, lease-to-own / ijarah muntahia bittamlik on Resolution No. 110, and diminishing partnership / mushārakah mutanaqisah on Resolution No. 136). The other half is where your money SITS and GROWS between purchases: the savings account, the investment account, the profit-sharing deposit. This resolution is the primary OIC anchor for that second half. It answers a question every Muslim saver eventually asks — is this so-called Islamic savings account actually halal, or is it interest with an Arabic label? — and it answers it structurally, from the contract, not from marketing.
THE ONE FACT EVERYTHING HANGS ON. In a genuine Islamic investment account the bank is not borrowing your money and paying you interest for the use of it. It is the working partner in a Muḍārabah (also called Qirad): you and the other depositors supply the capital, the bank supplies the management and effort, and you share the realised profit by a pre-agreed proportion. The resolution states it plainly: the party entrusted with investing the funds is the Muḍārib, 'whether he is a natural or legal person such as banks, and financial institutions', and 'the relation between him and the owners of the funds is Muḍārabah (Qirad) since he is entrusted with making the decisions on investment, management and organization.' A loan pays a fixed return whatever happens to the money; a Muḍārabah pays a share of whatever the money actually earns. That single difference is the whole of the matter, and the six reader-tests below are just that difference viewed from six angles.
TEST 1 — NO PRINCIPAL GUARANTEE FROM THE BANK (the litmus test). Because the bank is the Muḍārib, it is a trustee of your capital, not a debtor to it. The resolution: 'The Muḍārib is a trustee, and therefore he should not guarantee any loss or damage unless such loss or damage is due to misconduct or negligence, which include violation of Shariah requirements or the terms and conditions of the investment contract.' So a product where the institution promises to hand your capital back in full PLUS a fixed return, come what may, is describing a loan with interest, not a Muḍārabah — however it is branded. The resolution even closes the obvious escape routes: this trustee rule 'does not change under a claim that it is similar to common Ijārah, or by stipulating and pledging such a guarantee in the contract.' You cannot contract the guarantee back in. (What IS allowed: a guarantee from a genuinely independent THIRD party — 'provision of a guarantee by a third party is permissible, in accordance with the Academy resolution no. 30 (4/5) paragraph (9)' — because that is a donation from outside the contract, not the working partner underwriting his own risk.)
TEST 2 — PROFIT IS A SHARE, NOT A RATE. Your return must be a proportion of the actual profit, fixed in the contract as a ratio, not a promised percentage of your principal. The resolution permits the bank to be given a performance incentive, but only on top of a pre-specified split: 'It is permissible in Shariah to set up a rate of expected profit and stipulate that if realized profit exceeds that rate, the Muḍārib shall be entitled to a specific share of this increment. This is to be done after specifying (in the contract) each party's share in the profit regardless of its amount.' Read carefully: the 'expected profit rate' is a benchmark for a Muḍārib incentive, not a guaranteed yield to the depositor. If a product quotes you a fixed annual percentage on your balance and calls it profit, that is the tell of a disguised loan.
TEST 3 — THE BANK PAYS ITS OWN OVERHEADS OUT OF ITS SHARE. The Muḍārib earns its cut precisely so that it can run itself from it. The resolution: 'Since the institution manages the Muḍārabah through its employees and workers, it should bear their expenses and all other indirect expenses because such expenses are supposed to be covered from the profit share earmarked for the Muḍārib. The Muḍārabah should not bear anything other than direct expenses that belong to it.' So salaries, branch costs and general overheads should be paid from the bank's profit share, and only expenses directly attributable to the investments themselves may be charged to the pooled account. Overheads quietly deducted from the pool before profit is split is a red flag.
TEST 4 — FAIR POOLED-ACCOUNT MECHANICS (the numar method). Real investment accounts pool many depositors who put in different amounts for different lengths of time, so how is the shared profit divided fairly? The resolution blesses the classical daily-product ('numar') method: 'It is all right for profit (calculation and) distribution to use the numar traditional method, which is based on considering the principal of each investor and its period of stay in the investment (pool).' Each depositor's share tracks both how much they contributed and how long it stayed invested — the fairest weighting, and the mechanism behind honest profit-sharing statements.
TEST 5 — LOCK-INS AND MATURITIES ARE ALLOWED, BUT THEY BIND. A Muḍārabah is by default a contract either side can end, but the resolution recognises two ways it becomes binding: once the Muḍārib has actually started work, and 'When the owner of the funds (the Rabb al-Māl) or the Muḍārib undertakes not to dissolve the contract within a specific period. In this case, he has to honor his pledge to not interrupt the investment process during that period.' So a fixed-term Islamic deposit with an early-withdrawal restriction is legitimate — the undertaking is real and must be honoured — and a maturity date can be set by mutual consent so the arrangement simply expires at term. A genuine profit-sharing lock-in is not the same thing as a term deposit paying guaranteed interest; Test 1 still governs the return.
TEST 6 — THE INSTITUTION, NOT THE PEOPLE IN IT, IS THE PARTNER. When a bank or fund manages the Muḍārabah, the legal person is the Muḍārib 'regardless of any change that might take place in the general assembly, board of directors, or the executive management', and a merger with another legal person does not by itself disturb your account. But there is a saver's protection built in: 'if one branch of the institution that manages the Muḍārabah becomes independent and obtains its own legal personality, the funds' owners will have the right to exit from the Muḍārabah, even if the contract period has not yet expired.' You agreed to entrust a particular institution; if that institution is materially changed under you, you may leave — even mid-term.
WHERE THIS SITS IN THE CORPUS. Resolution 123 is the settled OIC statement that the whole 'halal investing' side of this site rests on: an Islamic investment or savings account is a Muḍārabah in which the bank works your pooled capital as a trustee-partner and shares realised profit with you — not a lender paying interest. It complements, rather than repeats, the corpus's earlier Muḍārabah / investment-certificate material (Muqāraḍah and investment certificates, and the shares-and-units rulings): those govern tradable certificates and equity screening, while 123 governs the ordinary pooled deposit account itself. Read it alongside the home-finance anchors and the picture is complete on both sides — how a Muslim may righteously borrow-to-own AND where a Muslim may righteously park and grow savings.
Wording inside quotation marks is quoted from the source. The rest is this notebook’s summary of it — read the original before relying on it.
Provenance
- Compiled from
- Compiled 2026-07-18 from the International Islamic Fiqh Academy's OWN OFFICIAL ENGLISH text of the resolution, read on TWO independent published surfaces and cross-checked verbatim between them: [1] the Academy's OFFICIAL ENGLISH EDITION, 'Resolutions and Recommendations of the International Islamic Fiqh Academy' (official edition, October 2021, published by the Academy at iifa-aifi.org), which prints the ruling as 'Resolution No. 123 (5/13) / Qirad or Joint Muḍārabah in Financial Institutions (Investment Accounts)', with the session line 'holding its 13th session in Kuwait City, State of Kuwait, on 7–12 Shawwāl 1422h (22–27 December 2001)'; and [2] the Academy's LIVE ENGLISH WEB PAGE for the same resolution at https://iifa-aifi.org/en/32844.html, which reproduces the same operative text. HONEST SOURCING LABEL: this is NOT a two-independent-TRANSLATION gold pairing, and it cannot be — the IRTI/IDB printed English edition covers only the resolutions of 1985–2000, and Resolution 123 is a 13th-session (December 2001) ruling, so it lies outside that edition's range. What is offered instead is the Academy's single official English text confirmed on two of the Academy's own published surfaces (print edition + live site) that agree verbatim on every span quoted here. Every embedded quotation was machine-verified as an exact substring of the official-edition text extraction (de-hyphenated, quote-folded, whitespace-collapsed) before this entry was written; any span that failed would have aborted the build.
- Source
- PRIMARY RULING (full title, session/city/dates, and the operative content — the definition of Joint-Muḍārabah, its legitimacy, the parties and the Muḍārabah relation, mixing of funds, commitment to a specific period, maturity, the numar profit-distribution method, the shareholders'-committee and investment-trustee provisions, the hurdle-rate/Muḍārib-incentive rule, identification of a legal-person Muḍārib with the merger/spin-off rules, and the guarantee ruling with its third-party-guarantee cross-reference) from the INTERNATIONAL ISLAMIC FIQH ACADEMY (OIC), read on two of the Academy's own official-English surfaces that agree verbatim: [1] the OFFICIAL ENGLISH EDITION, 'Resolutions and Recommendations of the International Islamic Fiqh Academy' (official edition, October 2021), printing the ruling as 'Resolution No. 123 (5/13) / Qirad or Joint Muḍārabah in Financial Institutions (Investment Accounts)', 'holding its 13th session in Kuwait City, State of Kuwait, on 7–12 Shawwāl 1422h (22–27 December 2001)'; and [2] the Academy's LIVE ENGLISH WEB PAGE for the resolution, https://iifa-aifi.org/en/32844.html. HONEST LABEL: not a two-independent-translation gold pairing (impossible here — the IRTI/IDB printed edition ends at year 2000 and this is a 2001 resolution); one official English text confirmed on two published Academy surfaces. Every quotation machine-verified as an exact substring of the official-edition extraction before writing.
- School / basis
- Cross-madhab / collective-ijtihad (the International Islamic Fiqh Academy of the OIC is a supra-madhab body of assembled senior scholars; its resolutions represent collective ijtihad rather than a single school's position). Resolution No. 123 (5/13), 13th session, Kuwait City, State of Kuwait, 7–12 Shawwāl 1422H (22–27 December 2001). Operative content, verbatim from the Academy's official English edition (Oct 2021), re-confirmed on the Academy's live English web page (iifa-aifi.org/en/32844.html). RELATION (Third) — the party entrusted with the funds is the Muḍārib, and 'the relation between him and the owners of the funds is Muḍārabah (Qirad) since he is entrusted with making the decisions on investment, management and organization.' PROFIT INCENTIVE (Tenth) — 'It is permissible in Shariah to set up a rate of expected profit and stipulate that if realized profit exceeds that rate, the Muḍārib shall be entitled to a specific share of this increment. This is to be done after specifying (in the contract) each party's share in the profit regardless of its amount.' EXPENSES (Eleventh) — the institution 'should bear their expenses and all other indirect expenses because such expenses are supposed to be covered from the profit share earmarked for the Muḍārib. The Muḍārabah should not bear anything other than direct expenses that belong to it'; and on structural change, 'if one branch of the institution that manages the Muḍārabah becomes independent and obtains its own legal personality, the funds' owners will have the right to exit from the Muḍārabah, even if the contract period has not yet expired.' GUARANTEE (Twelfth) — 'The Muḍārib is a trustee, and therefore he should not guarantee any loss or damage unless such loss or damage is due to misconduct or negligence, which include violation of Shariah requirements or the terms and conditions of the investment contract'; a third-party guarantee is permissible 'in accordance with the Academy resolution no. 30 (4/5) paragraph (9).' PROFIT DISTRIBUTION (Seventh) — the numar traditional method 'based on considering the principal of each investor and its period of stay in the investment (pool)' is permitted. COMMITMENT (Fifth) — an undertaking 'not to dissolve the contract within a specific period' must be honoured. Closing invocation: 'Indeed, Allāh is All-Knowing.'
- Captured
- 2026-07-18
- Added
- 2026-07-18
- Trust
- Primary or near-primary source with a stable public URL.
Compiler’s note
The corpus's primary-OIC anchor for the SAVINGS/INVESTMENT side of a riba-free financial life — the counterpart to the home-finance anchors (Res 40-41 murabaha, Res 110 ijara, Res 136 diminishing mushārakah). WHY THIS ONE: the site's 'halal investing' and audit material implicitly rests on the Muḍārabah investment account (bank as working partner, depositors as capital providers, profit shared not guaranteed), but the corpus had no PRIMARY OIC ruling defining that account — only tangential Muḍārabah/certificate material. Res 123 (5/13) is exactly that: the settled OIC statement of what a Shariah-compliant investment account is and the tests that separate it from disguised interest. It is settled (a clean 'Resolves' with twelve numbered sections, not a postponement) and on-theme. SIX reader-tests, each drawn from the resolution's own words: (1) NO principal guarantee from the bank — 'The Muḍārib is a trustee, and therefore he should not guarantee any loss or damage unless such loss or damage is due to misconduct or negligence' (a guaranteed principal+return = a loan, not Muḍārabah); (2) profit is a SHARE not a rate — a Muḍārib incentive is allowed only 'after specifying (in the contract) each party's share in the profit regardless of its amount'; (3) the bank pays its own overheads from its profit share, the pool bears 'nothing other than direct expenses'; (4) fair pooled mechanics via the numar method weighting principal × time; (5) lock-ins/maturities are valid and binding but do not convert the return into guaranteed interest; (6) the legal person (not its board/management) is the Muḍārib, with a saver's right to exit early if a managing branch spins off. SOURCING (honestly labelled): the Academy's own official English on two published surfaces that agree verbatim — the official Oct-2021 edition PDF + the Academy's live English page iifa-aifi.org/en/32844.html. NOT a two-independent-translation gold pairing and it cannot be: the IRTI/IDB printed edition covers only 1985–2000 and Res 123 is a December-2001 ruling. All 13 verbatim spans machine-verified against the official-edition extraction (build_res123.py canon = de-hyphenate + fold quotes/dashes + collapse whitespace, then substring). DROPPED per no-fab: no madhab tally, no vote count, no Qur'an verse (none cited), no hadith number, no market/AUM/rate figure, no provider graded (the six tests are for the reader to apply). GLOBAL-FIRST: a universal contract-law ruling, no market-specific content and no AU baseline. NEXT candidate: Res 137 (3/15) 'Ṣukūk al-Ijārah' (settled, on-theme, and the ruling Res 110 had postponed on lease-securitisation); or Res 30 (4/5) 'Muqāraḍah (Muḍārabah) and Investment Certificates' if not already covered — VERIFY 'Resolves' on disk first. AVOID deferrals Res 122 (4/13, postponement) and Res 124 (6/13, postponement).
Topics
islamic-financeribamudarabahmudarabaqiradjoint-mudarabahmuqaradahinvestment-accountinvestment-accountssavings-accountislamic-savingsislamic-bankprofit-sharingprofit-loss-sharingloss-sharingprincipal-guaranteecapital-guaranteeno-guaranteed-returnprofit-share-not-ratehurdle-ratemudarib-incentivenumardaily-product-methodpooled-fundsfund-mixingtrusteeamanahthird-party-guaranteelock-interm-depositmaturitysubstance-over-formprohibition-of-ribainterestdepositsoiciifafiqh-academycollective-ijtihad
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