Regulatory Alerts2013-03-17
On Moudharaba Operations Conducted by Islamic Banks
The Central Bank of Djibouti issued Instruction 2012-03 to regulate Moudharaba operations conducted by Islamic banks, establishing clear definitions for capital holders and managers while mandating that contracts specify capital amount, duration, profit-sharing mechanisms, and risk allocation. The regulation requires capital holders to bear operational losses unless caused by the manager's negligence, mandates dedicated accounts for fund management, and restricts asset holding periods to six months unless renewed by the central bank. Furthermore, it clarifies remuneration structures, ensures Moudharaba capital does not constitute a direct claim against the manager, and aligns Islamic banking practices with general credit institution regulations upon promulgation.