Illustration 11: Determination of Settlement Amount
An Islamic bank provides Murabahah financing for the purchase of equipment that cost RM100,000. A 10% deposit was paid by the customer to the bank when the purchase order was made. The bank sold to the customer at RM117,614.36 for a financing period of 3 years at12% per annum. The mark-up after deducting the deposit is RM17,614.36. The following table summarises the financial data.
Financing Rate (12% per annum)
Period (36 months)
At the end of 24 months the payment schedule is reported as follows:
The customer wishes to settle the whole debt on the 24th month. The total amount payable including deferred profit is RM35,871.46. The bank may allow a rebate of RM2,226.79.