per month
- Sale price
- Profit
- Taxes
- Fees
- Total cost
- Equivalent annual rate
Murabaha calculator
Sale price, monthly payment and equivalent annual rate of a murabaha, however the profit is quoted.
Your murabaha
Amount financed: ·
Conventional loan of the same amount
- Monthly payment
- Interest
- Total cost
How a murabaha works
- You choose the item and ask the bank to buy it (promise to purchase).
- The bank buys it in its own name and becomes the owner: it bears the risk until delivery.
- It resells it to you with a stated profit; the total price is fixed in the contract.
- You pay this price in monthly instalments; it can no longer increase, even if you pay late.
The conditions set by the International Islamic Fiqh Academy
Murabaha to the purchase orderer is permitted when the sale concerns an asset that has entered the bank’s ownership and possession (resolutions 40 and 41 (2/5 and 3/5), Kuwait, 1988).
- The bank bears the loss of the asset before delivery and is liable for hidden defects.
- The client’s unilateral promise may bind them; a promise binding both parties is prohibited, as it amounts to selling what one does not own.
- The price is single and fixed in the contract: no separate interest depending on the term (resolution 51 (2/6)).
- No surplus for late payment (resolution 51 (2/6)); the bank may take security and make the remaining instalments due.
Flat or reducing rate: compare with care
A profit quoted “flat” (for example 3% a year on the initial amount) costs nearly twice as much, as an equivalent annual rate, as a reducing rate showing the same figure: it is charged on the starting amount for the whole term.
The equivalent annual rate shown here lets you compare a murabaha with a loan; it says nothing about whether the contract is permissible.