A wadi’ah (deposit) in which the depositee (wade’e) is responsible to return its subject matter to the depositor (mude’e) whatsoever. In other words, the depositor guarantees the subject matter of wadi’ah and is under obligation to give it back to its rightful owner at any time.
In the Islamic banking sphere, wadi’ah is a trust agreement structured in such a way that customers deposit money in a bank for safekeeping (safe custody) purposes and the bank guarantees the refund of the money. As wadi’ah is a trust, the depositee becomes liable, as a guarantor or custodian, to repay the amount of wadi’ah. However, the bank may request the customer’s authorization to put his funds to use as long as the funds remain deposited in the bank. The bank can keep all profited gained from the use of the funds, and it may, at its absolute discretion, pass a portion of the profits on to the customer in the form of hibah (gift).
Wadi’ah yad daman is an Arabic term (وديعة يد ضمان) that translates as guaranteed custody/ deposit.
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