Provision

A charge that an Islamic bank makes against earnings. In other words, it is a contra-asset that is created by charges made as expenses against income. Unlike a reserve, a provision is created even though there is no income. Provisions come in two different guises: specific provisions and general provisions. Provisions of either type are made in connection with an Islamic bank’s receivables, financing assets, and investment assets, in cases where there is a doubtful collectively of receivables or an impairment of assets.