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Islamic Finance

  Islamic Finance   |   Terms
  • 412
  • March 11, 2023
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Reserve

An amount that is taken out of an Islamic bank’s income (mudaraba income, investment account holders’ income, etc) as a precaution against future losses or income uncertainty. More specifically, a reserve is a component of equity (of either investment account holder and/ or shareholders) and is made up of amounts appropriated out of income. In general, reserves in an Islamic bank subdivide into two types: profit equalization reserves and investment risk reserves.


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