This fatwa acknowledges that certain conditions will dictate that customers will transfer or withdraw their funds from a shari'a financial institution as a result of a displaced commercial risk, necessitating shari'a banking policies that:
- smooth over revenue without a profit equalisation reserve; and
- smooth over revenue with a profit equalisation reserve.
Accordingly, shari'a financial institutions require a set of shari'a-based guidelines pursuant to which they can form a profit equalisation reserve, derived from their own profits, and which tells them when may draw upon it. The fatwa dictates that income smoothing may only be conducted on third party monies under a mudharabah agreement. It may not be conducted if its implementation will merely result in accruing interest for the bank.
In the case of income smoothing without accessing a profit equalisation reserve, where profits from an enterprise are lower than projected, a shari'a financial institution may relinquish its right to equalise financial incentives for customers in order to remain competitive.