All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.
Islamic banks distribute profits to their customers under the name "Mudarbah Company" where one party, the investor (Rab-ul-mal) entrusts money to another party, the financial manager (Mudarib) for the purpose of carrying out a business (Modaraba) and the profit is divided according to the percentage agreed upon by both parties.
Here, the Arab Islamic Bank manages and runs the business while the holders of accounts provide the funds to be invested. Therefore, the latter are entitled to a portion of the profits that the Bank makes from carrying out businesses.
Accordingly, if the Mudarabah contracts of the Arab Islamic Bank are Sharia-compliant, then the resulting profits are lawful.
However, if these contract involve some violations of the rules of Sharia in this regard-such as the forbidden penal clause-then the portion of the profits corresponding to these violations is forbidden as well. This is true unless the owner of the account follows the opinion of the Sharia committee in charge of issuing fatwas to the Arab Islamic Bank, and thus he/she is cleared from liability.
To our knowledge, the Arab Islamic Bank adheres to the rules of Sharia followed by Islamic banks and the fact that it is a branch of a convetional bank has no effect whatsoever since the origin of the funds from which the Bank was established is lawful as it is that of the shareholders and other funds. However, what counts, here, is the financial transactions in which this mixed money (Lawful and unlawful) is used as well as meeting the conditions of Sharia in this respect. And Allah the Almighty knows best.
