An amount that is taken out of an Islamic bank’s income (mudaraba income, investment account holders’ income, etc) as a precaution against future losses or income uncertainty. More specifically, a reserve is a component of equity (of either investment account holder and/ or shareholders) and is made up of amounts appropriated out of income. In general, reserves in an Islamic bank subdivide into two types: profit equalization reserves and investment risk reserves.
October 24, 2023
