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Finance - Pool Management and Profit Distribution

The concept of Islamic Banking (IB) is different from that of Conventional Banks (CB). The concept is not only different with respect to funds deployment but also funds mobilization as IBs cannot enter into any interest based activity. All the funds therefore mobilized by them and the funds deployed there-against should strictly be in accordance with the Shariah principles.

For the purpose, IBs are required to devise a mechanism for funds mobilization, its deployment and the resultant manner of the distribution of profits so earned. The stakeholders of the profit distribution mechanism would include, among others, deposit-holders, financial institutions and high net-worth individuals. As the bank may itself pool its equity alongside other stakeholders in the deployment of assets, it shares the profit under the said mechanism. This mechanism so devised by the IBs is termed as “Pool Management System”.
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