Previously CASA is governed by al-wadiah dhamanah that defines as a safe-keeping with guarantee. CASA is the acronym for current and saving accounts, which is commonly used term in the banking sector across South-East Asia including Malaysia. Depositors who keep money via CASA are rewarded hibah. It is, however, not promise.
In its simplest form, hibah refers to a transfer of gift from an Islamic bank to a depositor that is given out of volunteer basis or deliberation. To attract depositors, hibah giving is viewed as another dimension of value proposition for Islamic banks, which indirectly can improve their customer base for an improved funding for their assets.
Hibah is solely based on Islamic banks’ discretion without made it compulsory to avoid riba. Earlier, Islamic banks give hibah to depositors on the basis of indicative rate of hibah, which is found to be practical and convenience.Today, however, a new concept of hibah viz., historical hibah is made visible. Qard and al-wadiah yad dhamanah are subject to hibah. Overtly, the former employs historical hibah.
Qard is a contact of lending money by a depositor to a bank where the latter is bound to repay an equivalent replacement amount to the lender. Some features are: (1) Depositors become the lenders by placing deposits with Islamic banks – known as the borrowers. (2) This contract outlaws any increments to the original loan amount – as this is observed as a walk way toriba. Any additions, however, is tolerable at the end of the contract at banks’ discretion – some banks have called it bonus to denote value proposition, and (3) Islamic banks promise to pay back the principal but without any returns to depositors.
Al-wadiah yad dhamanah isis a safekeeping with guarantee. Some features are: (1) The bank is liable for any loss to the deposited money (2) Profit gained from the use of the deposited money is exclusively owned by the bank (3) The bank can use the deposited money, and (4) The deposited money can be pooled together with other assets of many depositors.
Beyond 3rd August 2016, however, hibahpractice tends to be different. The banks are given until 31 July 2018 to migrate all products based on al-wadiahyaddhamanahto qard and fully comply with the requirements of the latter.By itself, the banks need to notify the customer of any changes in terms and conditions arising from the transition from al-wadiahyaddhamanahand give their customers leeway to terminate the contract should they decide not to opt the changes.
Byward qard-based CASA, banks have more control to manage their liability effectively. The banks now can use the deposited money directly without obligation to publish an indicative rate to compensate the depositors.To date, hibah hibahhibah giving is solely based on the bank’s discretion. This also extends the notion that the bank is not required to disclose the indicative rate or prospective granting of hibah. The bank has the discretion to disclose historical information on the hibah grantedgranted provided that such information shall not be construed as an indicative rate or give rise to any obligation on the part of the bank to provide such hibah toto the lender.
Given this new trend of today, the customer is no longer known as a trustor but as a lender and the bank as a borrower (previously a trustee under al-wadiah yad dhamanah).A question to ponder -can we say this relationship similar to a creditor-debtor relationship like in the case of conventional bank?Still, perhaps, CASA under Islamic banks have considered Shariah principles in ensuring the Shariah compliance of the products – that capture distinctively the features of CASA products.Issues like reconciliation and public literacy on qard qard-based CASA, however, need to be monitored with cautious.
Another dimension that needs an insightful attention is on the term historical hibah as I have outlined earlier. Of course, Islamic banks are allowed to give hibah based on historical hibah but to attend such disclosure with a vibrant negation that disavows any legal liabilities on the part of Islamic banks to grant hibah based on the divulged historical rate. Certainly, there exists a clear gap between indicative rate of hibahand historical hibah.
The former is a rate demonstrating the future prospect of return payable to the depositors who placed money with the bank in which the rate is determined according topreceding performance or it is subject to projection of the future return. The latter, however, is the actual hibah paid to the depositors in the past.
All in all, the current move indicates CASA is the cheapest platform of source of fund for banks given a tendency that the banks may or may not pay hibahto depositors. This is, however, one-sidedconception. Indeed, the banks at their discretion may provide hibahto reflect the term Islamic giving and for the purpose of market transparency that help to maintain their survival and competitiveness in the industry, at least