Contemporary Issues in Current Account Operations in Pakistani IBs-Sharia Compliant Solution

Contemporary Sharia scholars have three stances about the Current Account 2SHUDWLRQV LQ 3DNLVWDQL ,VODPLF %DQNV ,%V L H L ,MDUDK EDVHG FRQWUDFW LL :DGL¶DK EDVHG contract, and (iii) Qard based contract. This paper is an attempt to delve into the root causes of the differences of scholars and to find Sharia compliant solution acceptable for all. Descriptive as well as applied approaches are used in this paper. Clearing of ambiguity on this issue may result in twofold benefits: from public point of view, it would satisfy practicing Muslims which may result in form of huge deposits in this account (ii) from IBs viewpoint the Current Account is a bonus deposit.


Introduction
Banks invite public to deposit their savings 1 WKLV VDYLQJ LV WHUPHG DV µGHSRVLW ¶ LQ (QJOLVK DQG µ:DGLµDK ¶ LQ $UDELF > @ 'HSRVLWV FDQ EH FODVVLILHG LQWR WKUHH PDLQ W\SHV L Current Account (CA) or Hisab Jari (ii) Saving Account (SA) or Hisab Tawfeer (iii) Fixed 'HSRVLW )' RU :DGLµDK 6DELWDK Saving Account (SA) holder is entitled to gain profit in form of interest from Conventional Banks (CBs), and receive profit in the capacity of Rab-ul-Mal from Islamic Banks (IBs). This account is maintained, to secure savings on long-term basis, though no restriction is implemented for withdrawal of amount from this account at any time.
Fixed Deposit (FD) is an account, which restricts the account holder from any withdrawal, totally or partially, before agreed tLPH ZKLFK LV FDOOHG µWHUP ¶ EHWZHHQ &%V ,%V DQG 'HSRVLWRUV $W WKH HQG RI WKH µWHUP ¶ WKH &%V SD\ LQWHUHVW ZKLFK LV HLWKHU D IL[HG DPRXQW RU D fixed proportion of deposited amount, while IBs offer profit that is neither guaranteed nor fixed, but it falls gHQHUDOO\ LQ WKH HVWLPDWHG UDQJH 7KRXJK ,%V WUHDW WKHVH GHSRVLWV DV µVDYLQJ DFFRXQW ¶ but distinguish it from SA by name of Fixed Deposit (FD) or Term Deposit (TD). The rate of interest from CBs and share of profit from IBs are comparatively higher than that of the normal saving account (Marifa, 2014).
In Current Account (CA) deposits, account holder is not entitled for any profit or loss but he can get benefit of withdrawal from his account at any time, total or partial, without any conditions or restrictions. Probably, this is because of this convenience, this account is also called Checking Account or Demand Deposit Account (DD). 2 Currents Account Holders (CAHs) are generally the businesspersons who need hassle free unlimited withdrawal from their account and the practicing Muslims who want to refrain from riba from CBs.
According to SBP statistical bulletin report, June 2015, total deposits in CA of Pakistani Banks, disregard to Islamic or conventional, reach to PKR 3019.5557 billion and for nonremunerative CA of only IBs is 373.5 billion. Growth of this account is noteworthy i.e., 30.2% annual growth rate is recorded in 2014 ± 2015. 3

Current Banking Practices
Some conventional British Banks such as National Westminster Bank 4 as well as US Banks, like American Bank 5 distribute a portion of profit with CAH, which is earned through Current Accounts. Some Pakistani Conventional Banks do the similar practices; such as Standard Chartered Bank 6 Pakistan offers 10% cash back on fuel every month to their Xtra Mile Account (i.e., Current Account Holders); similarly Bank Al-Habib 7 Pakistan announces: 0.01% profit rate to Al-Habib Tijarat Account and Al-Habib Apna Individual Account (i.e., Current Account Holders).
Though no Islamic Bank (IB) in Pakistan offers any such monetary benefits to the CAHs but all of them offer non-monetary incentives by one way or other (see table 1) such as: (i) Access to all ATMs linked to MNET (ii) Inter-bank funds transfer facility through ATM (iii) Facility of making instant payments (iv) Free internet banking services (v) Round-the-clock phone-banking (vi) Free account statement facility etc.
Current banking practices reveals that portfolio of Current Account has become an integral part of all Banking systems, irrespective to CBs or IBs, because of its demand from customer and being highly beneficial for the Banks, but, Islamic Banks cannot generate profit through it without vetting its status and explaining its profit generating formula on Sharia Standards.
,Q WKH VXEVHTXHQW OLQHV ZH FDVW OLJKW RQ GLIIHUHQW YLHZV DERXW WKH VWDWXV ¶ DQG µSURILW JHQHUDWLQJ IRUPXOD ¶ ZKLFK KDV EHFRPH WKH PDWWer of debate among contemporary Sharia Scholars. For convenience, we break this discussion into five parts that would be dealt in five questions.

Research Questions
1) What is the status of Current Account Deposit in perspective of Sharia? 2) :KDW ZLOO EH 6KDULD UXOLQJ LI &$ LV WUHDWHG DV L ,MDUD LL :DGL ¶DK RU LLL 4DUG" 3) Will it be permissible in Sharia to offer monetary benefits or other incentives to CA holder? 4) Which facilities can or cannot be offered to CA holder? 5) What will be the ruling of Sharia, if CA holder places his CA deposits as mortgage against his outstanding debts?

Literature Review
Sharia scholars are divided into three groups on the matter of Sharia ruling on CA status:

Ijara Based Contract
Shahrani (2001) and Subaiti (1995) have discussed this relation in their articles: µ+LVDEDWXO -DUL\DK ZD +DTLTDWXKD ¶ DQG µDO-Hisabat-ul-Jariyah wa asaruha fi tansheet-il harakatil-LTWLVDGL\DK ¶ UHVSHFWLYHO\ EXW WKH\ GLG QRW PHQWLRQ LWV LPSOHPHQWDWLRQ LQ DQ\ EDQNLQJ V\VWHP To the extent of our knowledge, no Islamic bank in Pakistan deals CA on this relation. (see table  1) Sharia Scholars have determine different portfolios for different nature of contractual relations; such as, for getting benefit of the corpus of an article against FRPSHQVDWLRQ WKH EDL ¶ (sale) agreement is a valid contact, and for without compensation, the hibah (gift) contract is suitable; while for gaining benefit of the article against compensation without harming and perishing its corpus, the Ijara contract is vDOLG DQG ZLWKRXW FRPSHQVDWLRQ WKH µ$UL\D FDQ EH D suitable one (Kasani, 1997).
Ijara or lease is the transfer of the right of usufruct of particular corpus to another person in exchange for a rent (Usmani, 2013). Sharia Scholars are unanimous that Ijara on perishable and consumable articles is not allowed (AAOIFI, 2010); such as rice, wheat or fuel cannot be used as subject matter of Ijarah (Usmani, 2013). The same is the case of Current Account Deposits (CAD) i.e., its utility cannot be availed unless it is converted into commodity and/or consumed. Therefore, no possibility remains for Ijara contract on CAD.
Ijara contract on breastfeeding may be presented as example on consumable subject matter.
In this relation, ownership of the article remains with the depositor (the owner) through the article is possessed by a trustee (Rahmani, 2007). On the contrary, the trustee does not have intrinsic right to use the article; though he can get benefit of it with prior permission of the owner.
The four Islamic Jurists are unanimous on the verdict that charges cannot be levied on trustee if the damage is caused without negligence (Al-Muqaddasi, 1996) ,Q D QXWVKHOO :DGL ¶D LV D FRQWUDFW LQ ZKLFK WKH WUXVWHH QHLWKHU GHVHUYHV ULJKWV RI usufruct nor liable for any damage or loss, if it happens beyond his control.

Qard based Contract
In this contract, CAH is the creditor and bank is the debtor. This is the standpoint of Taqi Usmani (1999) which is also endorsed by International Islamic Fiqh Academy, Jeddah 10 and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) (AAOIFI, 2010). All Pakistani Islamic banks, except DIBPL, have accepted this viewpoint (see table 1).
In this contract: (i) ownership of article is transferred from the creditor to the debtor, (ii) the debtor is unconditionally entitled to use or consume the article, and (iii) the debtor is bound to return the same or the similar article to the creditor (AAOIFI, 2010).
Qard contract is a not non-profit relation as the profit sharing is against its instinct FKDUDFWHULVWLFV +DGLWK VD\V ³:KHQ RQH H[WHQGV ORDQ WR WKH RWKHU DQG WKH GHEWRU SUHVHQWV something or his animal as a gift to the creditor, the creditor should not accept the thing and should not derive benefit from the animal, apart from the situation where this (exchange of JLIWV KDV EHHQ WKH QRUP EHWZHHQ WKHP HDUOLHU´ (Majah,2008). Abdullah bin Salam admonished $EX %XUGDK ³<RX OLYH LQ D ODQG ZKHUH LQWHUHVW SUHYDLOV LQ abundance. If there is something receivable by you from someone and they give you even a handful of straw, barley or fodder as JLIW GR QRW DFFHSW LW EHFDXVH WKDW ZLOO EH ULED´ (Bukhari, 2008).

Analysis
Sharia ruling on the finding of three possible relations of CAHs and IBs is appended below:

Ijara based Contract
In the light of Sharia, Current account can never be an Ijara based contract because it is necessary for a valid contract of Ijara that the corpus of the leased article must: (i) remain intact, and (ii) remain in the ownership of lessor; while in the case of Ijara based contract between &$+ DQG ,% L WKH DUWLFOH ZKLFK LV D µFXUUHQF\ ¶ FDQQRW UHPDLQ LQWDFW DQG LI WKH FXUUHQF\ LV leased out it will deem to be a loan, and this loan is strictly forbidden in Sharia because it fall in Riba-ul-+DGLWK $ERXW VXFK WUDQVDFWLRQ WKH KRO\ 3URSKHW V D Z LQVWUXFWHG ³,W LV QRW SHUPLVVLEOH WR EDUWHU WZR VD ¶V aeôËŽ» RI GDWHV IRU RQH VD ¶ ÉŽ») nor two Dirhams for one 'LUKDP DV WKLV LV D NLQG RI XVXU\ ´ (Bukhari, 2008).
If IB is restricted by CAH to not to get benefit of the deposits or, on the other hand, IB announces that it is not guarantor for Current Accounts Deposits, there is a high possibility that this CA portfolio of IBs remain unattractive.

Qard Based Contract
Subject to some precautions and restrictions, current account deposits can be considered as Qard based contract, because it contains all sharia compliant features that are required for this contractual relation. In this contract: (i) ownership of article is transferred to debtor (ii) debtor retains right to use or consume the article to generate profit from it, and (iii) the debtor guarantees returning of the similar article or its substitute to the creditor. This relation suits CAH and IB in a sense that: (i) IB becomes an owner of the deposits (ii) IB can generate profits by using or consuming of these deposits (iii) IB gives guarantee of return to the CAH as and when demanded, even in the case of total or partial damage of deposits with or without negligence of IB.
Some scholars do not consent to this interpretation on the ground that intention of CAH behind this arrangement is the security of money, not to extend assistance to IB, while one of the important factors of loan is the intention to help to the debtors.
This objection seems invalid because the intention of benevolence is not the integral part of Qard, as obvious from the incident of Zubair (r.a), who used to receive deposits from :DGLµD GHSRVLWRUV LQ IRUP RI ORDQ VD\LQJ ³7KLV LV 6DODI ORDQ QRW D :DGLµD WUXVW EHFDXVH , IHDU LWV GHVWUXFWLRQ´ (Bukhari, 2008). This arrangement of deposit by Zubair (r.a) gives some important insights about Qard DQG :DGLµD L LQWHQWLRQ RI FUHGLWRU WR KHOS GHEWRU LV QRW QHFHVVDU\ FRQGLWLRQ IRU 4DUG LL WKH deposited articles/money as a Qard with the intention of security is not against Qard contract (iii) the debtor is liable to return Qard at any cost (iv) the WUXVWHH LV QRW OLDEOH WR UHWXUQ :DGLµD LI damaged or lost without his negligence.
Primary intention of creditor should always been a reward in the hereafter but if he intends also the security of his article by way of Qard arrangement it does not go against the injunctions of sharia. Therefore, nothing seems objectionable, if CAH and IB enter into Qard based contract with the intention of securitizing the deposits (Usmani, 1999).
Qard based contract should have three important features: (i) debtor is authorized to use loaned article/money with his free-will (ii) debtor is bound to refund the same or substitute article/money of the same value to the creditor on his demand (iii) debtor is the guarantor of the debt.
Since all required features of CAH and IB are found in the Qard based contract, it seems fit for CAD in IBs and can be recommended as the best sharia compliant arrangement for this purpose.

Current Account Deposit as Mortgage
Can CAD be dealt as mortgage in favor of CAH in context of Qard Based Contract? Majority of Sharia Scholars are of the opinion that the mortgage article must: (i) be a real asset (ii) have possessing value and (iii) saleable.
According to Kasani (1997) ³5HTXLVLWHV IRU D PRUWJDJH LWHP DUH WKDW LW VKRXOG EH saleable in trade, that is, existent at the time of the transaction, of the category of the substance, JRRGV SRVVHVVLQJ YDOXH VSHFLILHG DQG FDSDEOH RI EHLQJ KDQGHG RYHU WR WKH EX\HU´ (Kasani, 1997). 0XTDGGDVL H[SRXQGV ³,W LV QRW DSSURSULDWH WR PDNH VXFK DUWLFOH D PRUWJDJHG Ltem which is not saleable, such as Ummu Walad, endowed amount and something already mortgaged. This is because the objective of mortgage is to recover the loan by disposing off the mortgaged item and something which is not saleable cannot fulfill this objeFWLYH´ (Al-Muqaddassi, 1996).
Keeping Kasani ( Nevertheless, Kharshi Maliki finds room for the considering of debt as a mortgage, such DV ³7R SODFH D GHEW ORDQ DV PRUWJDJH ZLWK WKH GHEWRU WKH SUH-requisite is that the repayment period of the loan which is being placed as mortgage should be at least equal to that of the loan for which the mortgage is brought into effect. This is because, if the debt/loan remains in possession of the mortgagee after completion of the mortgage period, it becomes similar to loan and, consequently, two agreements, loan and sale, will enter in one sale agreement. However, if it is decided that after completion of mortgage period the loan will be placed with a trustworthy WKLUG SHUVRQ WLOO FRPSOHWLRQ RI ORDQ SHULRG WKLV DUUDQJHPHQW ZLOO EHFRPH SHUPLVVLEOH´ (Al-Kharshi, 1896).
In a nutshell, CA may be used as mortgage: (i) if the CAH is also a debtor of the bank and places his current account as mortgage with the bank for authentication of the debt/loan (ii) the creditor is a third person other than the bank, and then the debtor places his CAD with that person in a way that the latter is authorized to withdraw from the account whenever he wants (iii) the creditors is other than IB and he demands that the debtor must freeze his CA in the bank until the maturity of loan period (Usmani, 1999).

Conclusion and Recommendations
1) Qard based contract (QBC) between CAH and IB seems to be a best possible Sharia compliant mode for Current accounts deposits (CAD) 2) Offering monetary incentives to CAH in any form is strictly forbidden; this is tantamount to riba. 3) IB may offer CAH non-monetary services and facilities but these should not exceed the facilities that are offered to other account holders across the board. These services and facilities may include: (i) e-Banking facility (ii) Free ATMs facility (iii) Free Inter-bank funds transfer through ATM or e-Banking (iv) Facility for instant payments (v) 24/7 customer services through mobile calls and e-banking (vi) SMS alerts on transactions (vii) Fund transfer facility to own or other accounts (x) Free chequebooks, etc. 4) Any incentives exclusive for CAH in any form, monetary or non-monitory, will be tantamount to riba 5) Mortgaging from Current Account by CAH is highly avoidable if the arrangement is based on QBC 6) CA may be mortgaged by the CAH against his loan subject to two conditions: (i) repayment period of the mortgaged loan should be at least equal to that of the loan for which the mortgage is brought into effect, and (ii) after completion of mortgage period, the loan will be placed with a third party till maturity. Current Account Facilities -Free from any minimum balance charges.
-Unlimited deposits and withdrawals.
-Free ATM card.

Saving Account Facilities
-Free from any minimum balance charges -Profit is calculated on monthly average basis -Profit will be paid every month -Unlimited deposits and withdrawals -Enjoy higher profits on higher balances -Free ATM card -Additional benefits such as e-Statement, 24/7 Phone Banking. Current Account Additional Facilities -None 12 http://www.bankislami.com.pk/product_services/islami_current_account/ 13 http://www.albaraka.com.pk/retail-banking/deposit-accounts/abpl-current-account/ Global Review of Islamic Economics and Business, Vol. 6, No. 1 (2018)  -Access to PKR Account through Burj Debit MasterCard.
-Free access to Burj online banking.
-Free internet banking service including free funds transfer within Burj Bank branches.

Saving Account Facilities
-Attractive tiered profit rates.
-Profit calculated on Monthly average balance with monthly and half-yearly payout.
-Unlimited number of transactions free of charge.
-Free online banking.
-Unmatched services available at Burj Bank branches present nationwide. Current Account Additional Facilities -None