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Is Scouting Around for the Best Hibah Rate for Deposit Accounts Permissible?

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Before answering the question, first we need to understand what the underlying contracts for deposit accounts are. Deposit accounts can be divided into two; savings account and current account.

In Malaysia, savings account offered by Islamic banks is generally under the contract of wadi’ah yad dhamanah (safe keeping with guarantee), mudharabah (profit sharing) and qard (benevolent loan). This article will be focusing on the first contract as it has to do with hibah (gift).

Wadi’ah yad dhamanah is a form of wadi’ah (safe keeping) contract. Under wadi’ah yad dhamanah, banks, as custodian and trustee, have the authority to use the deposited money, and guarantee to return the same when depositors need the money. As a reward for the utilisation of the money, the banks at their discretion, may give hibah to the customer. In other words, no payment of dividend or hibah is promised.

The hibah offered by Islamic banks is different from interest practised by conventional banks. They look same but they are not the same. The hibah is derived from the contract of wadi’ah yad dhamanah and its payment is a sole discretion of a bank. While the interest is based on unfair gain and it is definitely forbidden in Islam.

The practice of giving hibah has raised a question of whether the ruling applicable on qard (loan) may also be applied in wadi’ah yad dhamanah. If yes, then the amount of repayment must be equivalent to the amount borrowed. If the amount of repayment is exceed the amount borrowed, then the excess is considered as riba, which is haram.

In a qard contract, a condition that provide benefits to the lender is not allowed. A hadith of Rasulullah SAW from Ali r.a. who said, that Rasulullah SAW had said:

“Every loan that gives benefit (to the lender) is a riba.”

In this regard, the Shariah Advisory Council (SAC) of Bank Negara Malaysia (BNM) in its 6th special meeting dated 8 May 2008 has resolved that:

“The ruling on wadi’ah yad dhamanah which involves money may also apply the rules of qard in terms of its parameters and its subsequent effects.”

Thus, the hibah given by Islamic banks is most likely similar to riba. Strictly, it’s not permissible because it would be tantamount to riba.

However, in the light of the complex financial environment, as a customer, we logically want to choose the best offer. But it needs to be reminded that we should not focus on the hibah as our main purpose to place money in a bank. This is to avoid hibah being treated like interest rates.

Earlier, the SAC of BNM, in its 35th meeting dated 22 May 2003, has resolved that:

“The practice of giving hibah by Islamic banking institutions to wadi’ah depositors is permissible. Nevertheless, such practice shall not become a norm in order to avoid this practice from becoming an ‘urf that resembles a condition in a deposit contract based on wadi’ah.”

Perhaps, why Islamic banks do offer hibah regularly is due to public interest (maslahah) in order for them to compete as an alternative to conventional banks where paying ‘interest’ is a common practice in all types of conventional banks’ non-shariah compliant savings account.

Nevertheless, hibah shall no longer be a specific feature of wadi’ah deposits in the future. Because as long as Islamic banks keep practising giving hibah, we may not be able to differentiate between Islamic and conventional savings account.

Allah knows best!

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