Banking Services in Islamic Banks — practice questions

Correct answer: C. Clauses 1 and 2: The Standard covers banking services that do not involve lending or borrowing, and Institutions may provide them against fees payable as a lump sum or as a percentage of the value of the service. The actual-cost restriction applies to service charges on loans under Shari’ah Standard No. (19), which is outside this Standard’s scope, and linking a fee to time is characteristic of charging for credit.

Correct answer: A. Clauses 2/3/1 and 2/3/2: The Institution may act as agent of the founders of a Shari’ah-accepted, licensed company in the steps of a public issue or a capital increase and receive fees, but the fees may not include any remuneration for extending credit. It may arrange for a third party to underwrite the subscription and receive a fee for that arrangement, and it may underwrite the subscription itself without charging any fee for the mere act of underwriting, while charging actual expenses for other services such as studies or marketing (see Clause 6/7 of Shari’ah Standard No. (5)).

Correct answer: D. Clauses 2/7/1 and 2/7/2: The safe deposit vault service is based on an Ijarah contract under which the customer is entitled to the usufruct of a vault within the Institution’s premises against a fee. The Institution is responsible for ensuring the safety of the vault, but it does not guarantee the safety of the items kept in it except in case of misconduct or negligence in keeping the vault. It is not a Wadi’ah of the contents, which remain in the customer’s possession.