Islamic Bank Profit

What a deposit earns in an Islamic bank's profit-sharing account.

Formula

How the calculation works

An Islamic bank does not pay interest; it shares the profit the bank makes from the deposits it deploys. The declared rate is a ratio of that profit, not a promise, which is why it is entered rather than fixed.

The arithmetic still compounds the balance monthly, because the credited profit joins the balance and shares in the next month's result. The name and the basis differ from a conventional deposit; the shape of the compounding does not.

Common mistakes

• Reading the declared rate as a guarantee. It is a ratio of realised profit, so the actual figure can come in above or below it.
• Comparing it to a conventional deposit on the rate alone. The basis is different, so the rate is a guide rather than a like-for-like promise.

When to use it

• Use it to see what a profit-sharing deposit is expected to return over a term, given the ratio you were quoted.
• It is not a tool for a conventional interest account; for that use the FDR calculator, which applies a fixed rate.

Worked example

100,000 at 7% for 12 months: profit 7,229.01, total 107,229.01.

Common questions

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Last updated: 2026-09-29