Title PGDIB Module 3 Lesson 1.pdf ✅

© Institute of Islamic Banking and Insurance London, United Kingdom Page 3 of 60 Module 3 Deposit Mobilisation: Approach of Islamic Banks to Accepting Deposits, Paying Returns and Deposit Protection Lesson 1 Mobilising Deposits in Islamic Banks: Account Structures, Contracts, and Return Mechanisms Deposit Mobilisation by Banks: A Key to Profitability and Economic Growth Banks are typically established with a minimum capital requirement to commence banking operations, either as a profit-driven venture by investors or as a public service initiative through government investment. However, this initial capital is insufficient for banks to fully provide loans and financing of individual and business customers and ensure financial stability. As a result, banks mobilise deposits from the public and to enable them to also expand their lending capacity, facilitate economic activities, and plays an integral role in income generation and profitability of banks. In both conventional banking systems banks offer account services to keep the deposited monies and earn interest on some types of accounts. Deposit Mobilisation as a Core Banking Function Deposit mobilisation is the process by which banks typically attract funds from individual and institutional depositors. These deposits represent an important source of funding for banks, as the banks use these deposits to extend credit to borrowers and invest in various assets to generate income. For shareholders and investors, this income translates into returns on equity and dividends, making deposit mobilisation a vital driver of the bank’s financial health. The deposits accumulated by a bank form most of its liabilities, while the loans and investments made by the bank constitute its assets.