A Case Study on Mudarba Fund Management

A bank manages funds on behalf of its depositors. There are four types of depositor which includes one year, six months, saving and current account holders. The total fund available in bank is 1500M; the share of different account holder is 40%, 20%, 15%, 10% respectively while the remaining proportion is of Banks’s shareholder. The investment rate of these the accounts is 90%, 80%, 60% and 50% respectively while shareholders are willing to invest 100% of their amount. The first three accounts come under the category of mudarib management; therefore, for these three accounts they will receive 85%, 80% and 70% against their investment. Hence, on the basis of above information calculation of return to the account holders shall be disbursed.

The bank has defined one side of the story which is describing the management of funds but bank seek that these funds should be properly utilized. In order to fulfill this purpose bank engage in 4 types of mudarib agreements with some entrepreneurs to earn return on investment. The description of these projects is as below.

Bank engage a mudarib and invest 400M on a condition that it will have 50:50 sharing of profit, while bank will pay a management of 25% to Mudarib. It was expecte that it will generate 40% rate of return.

The second contract bank engaged 300M of investment. Bank also agrees that mudarib can have 20% of bank investment as its own investment. The profit will be shared in 50:50 terms but bank management fee will 10% while mudarib will get 15% as management fees. The return on investment is expected to be 40%.

Bank invests in on mudarib 300M while mudarib has 100M, mudarib also has another murdaba contract with a third party with which bank agrees and have 200M from that party. If profit is distributed to all and sharing of profit is 70:30 with mudarib than how it engages every on with a return of 25%.

A person has a partnership contract with its partner bank enter in this partnership on mudarba basis with the person. Bank agrees that what the person will earn bank will get half of it with an investment of 215M. Unfortunately, this contract comes with a loss of 15%.

You are required to calculate the following.

Bank return from contracts

Bank rate of return from contracts.

Bank management of funds

Depositors return

Bank actual rate of return after management of fund.

Answer rating: 100% (QA)

To calculate the above values we need to start by calculating the amounts invested in each project by the bank and the mudaribs 1 Mudarib Management O... View the full answer