DEPOSITS AND DEPOSITORS
This chapter makes a brief examination of several issues relating to the deposit mobilisation aspect of Islamic banking. The chapter first discusses the participation of the Muslim populace in the deposit mobilisation effort. It then proceeds to discuss several key issues relating to the bank-depositor relationship questioning the stand taken by the Islamic banks on these key issues: return on demand deposits, small savings and inflation, provision of interest-free loans, liability for investment deposits and profit distribution.
Islamic bankers are generally of the view that saving is desirable, even a necessity in today's quest for the economic and social development of Muslim communities, where channelling savings to productive sectors of the economy is seen to be one of the most important factors conducive to development.1 However, many Muslim countries are among the least developed countries (LDCs) with a low per capita income. Although some LDCs save a relatively high percentage of their national income, in many of them saving is very low. Due to the low level of per capita income in these economies, even a fairly high percentage rate of domestic saving yields only a limited amount of new capital. As a result, most LDCs, with the exception of oil exporters, have depended on capital inflows from abroad to help finance development.2
Proponents of Islamic banking have been arguing that even the low income Muslim communities can contribute significantly and positively to the development of their communities by participating in the process of capital formation. This, they assume, would be achieved by adopting the 'habit of banking', or by putting savings in the banking system instead of hoarding or saving in the form of real assets like gold or silver.3 These proponents contend that, given the availability of suitable institutional mechanisms, those Muslims who are out of the banking system can be attracted to the savings process. They argue further that the present traditional banking system, to a large extent, is unsuitable for that purpose, as the banking sys-
1 IAIB, al-Mawsū'at al- 'Ilmiyya, I, p.260: Ṭā'il, al-Bunūk al-Islāmiyya, pp.57-9.
2 Dolan, Macro-Economics, pp.539-40.
3 Najjār, Bunūk bila Fawā'id, pp. 50-6; Abdeen and Shook, The Saudi Financial System,