(Chapter 6) Weitage and its calculation

Weightage: Meaning & Factors.

Weightage	:	Weightage means preference of one product in comparison to other product. On the other hand we can say weightage means giving the value of the specific or particular matter / subject higher or lesser than that of / in comparison to similar one.
Factors of Weightage	:

i)                     The more risk, the more weightage. (Customer’s point of view)

ii)                   The longer the period, more the risk. (Customer’s point of view)

iii)                  More the uses of Bank’s facility, less the weightage.

iv)                 Less the Uses of Bank’s facility, more the benefit weightage.

v)                   Moral Dimension / Ethical values

Weightage of Different Products

:

Weightage.

                                Types of A/C.

i)	AWCA	Tk.100	= 0
ii)	SND	Tk.1.00	= 0.55
III)	MSA	Tk.1.00	= 0.75
iv)	MTDR (36Month)	Tk.100	= 1.00
v)	Mudarabah Hajj deposit		= 1.30 (Up to 10 Years)
	Tk.100 above 10 years		= 1.35 (Above to 10 Years)
vi)	MSS	Tk.100	= 1.10 (5 years) = 1.30 (10 years)

Islamic Financial System:

	Distribution of Profit to Mudaraba Depositors:
	The Principles of calculation and distribution of profit to Mudaraba Depositors generally followed by different Islami Banks are as under:
	Mudaraba Depositors share income derived from investment of their fund.
.	Mudaraba Depositors do not share any income derived from miscellaneous banking services where use of their fund is not involved, such as commission, exchange, service charges and other fees realized by the Bank.
	Mudaraba Deposits get priority in the matters of investment over Bank’s equity and other cost free funds.
	The gross income derived from investments during the accounting year is, at first, allocated to Mudaraba Deposits and Equity & cost-free-funds according to their proportion in the total investment.

	Let us suppose that an Islami Bank applies the following weightages to Mudaraba Deposits.
	a) Mudaraba Hajj Savings Deposit                                            110%
	b) Mudaraba Term Deposits 36 Months                                     100%
	24     “	98%
	12 “	96%
	06 “	92%
	03 “	88%
	c) Mudaraba Savings	75%
	d) Mudaraba Short Notive	55%

 Commercial Banking under Islamic Framework

	On the basis of the above principles, let us work out the rates of profit using the information and figures given below:
	a) Total Investment	Tk. 1000
	b) Total Investment Income	Tk. 150
	c) Total fund employed
	i) Banks equity and Al-Wadeeah Deposits	Tk. 200
	ii) Mudaraba Deposit will be	Tk. 800 Tk. 1000
	Therefore the share of investment income of Mudaraba Deposit will be (150¸1000x800)	120.00
	Less:
	a) 20% Management Fee	Tk. 24.00
	b) 15% Loss Off-setting Reserve	Tk. 18.00 Tk. 42.00
Distributable Investment Income		Tk. 78.00

Sl.	Type of Mudaraba Deposit	Yearly Product	Weightage %	Weighted Product	Share of Distributable Profit	Rate of Profit
1	2	3	4	5	6	7
1	Mudaraba Hajj Savings	120	110	132.00	14.05	11.71%
2	Mudaraba Term Deposit
	36 Months	100	100	100.00	10.64	10.64%
	24 Months	110	98	107.80	11.48	10.44%
	12 Months	80	96	76.80	8.18	10.22%
	06 Months	125	92	115.00	12.24	9.79%
	03 Months	95	88	83.60	8.90	9.37%
3	Mudaraba Savings	120	75	90.00	9.58	7.98%
4	Mudaraba Short Notice	50	55	27.50	2.93	5.86%
TO                           Total		800		732.70	78.00