Depository according to Islamic principles is called Al-Wadiah. Al-Wadiah could be indicated as pure deposits from one party to another, both individual or organization. The deposits should be secured and returned whenever the owners require.
What is the Islamic foundation?
It is mention in the Al Quran Surah An Nisa: 58
“Verily, Allah commands that you should render back the trusts to those, to whom they are due;…..”
Al Quran Surah Al Baqarah: 283
“…., then if one of you entrusts the other, let the one who is entrusted discharge his trust (faithfully), and let him be afraid of Allah, his Lord…..”
Al Hadith:
Abu Hurayrah narrated that the Messenger of Allah pbuh said, “Convey (pay the) trust to those who deserve and do not respond to traitorous to the person who has betrayed you (hadith narrated by Abu Dawud and according to Tirmidhi this hadith is hasan, while Imam Hakim categorized it as sahih).
Ibn Umar said that the Prophet pbuh has said, “there is no perfection of faith for every person who had no trustworthy, no prayer for which no ablution.” (Hadith Narrated by Thabrani).
Ijma:
The prominent scholars of Islam throughout the ages have accomplished ijma (consensus) of the legitimacy of Al-Wadiah for human needs.
How the application of current Al-Wadiah?
In modern economic activity the recipient will use the deposit in economic activity. Therefore he must ask permission from the givers/depositors and then use the deposit. The recipient would guarantee the return of assets. The recipient may charge a fee to depositors as the cost of custody.
In the banking application, bank can use Al-Wadiah for the purpose of current account and saving account. All profits generated from the deposit of funds become the property of banks (bank is also the guarantor of all losses). In return, the depositors get a security guarantee of their property, as well as other demand deposit facilities.
Bank, as the recipient, is not forbidden to give some sort of incentive in the form of bonuses as long as it is not stated and the amount is not specified in value or percentage in advance, but it really is the discretion of bank management.
This is based on the words of the Prophet pbuh who was narrated from Abu Rafie that the Prophet pbuh ever asked someone to lend a camel. He then got the sacrificial camel (about 2 years old). After some time, Prophet pbuh ordered Abu Rafie to return the camel to its owner. But Abu Rafie came back to the Prophet pbuh and said, “O Messenger of Allah, a camel that we found is not equivalent; but it is only a larger camel and 4 years old.”
Prophet pbuh said, “Give it for verily the best of the best when you are paying.” (Hadith Narrated by Muslim).
It is therefore entirely different between bonus and interest. In practice, the nominal value may be smaller, equal, or greater than the interest rate.
Source: Sharia banks from theory to practice by Muhammad Shafi’i Antonio