Documente Academic
Documente Profesional
Documente Cultură
Sukuk investment: Comparison of the profits obtained by using Ijarah and Musharakah
Mutanaqisah principles with long-term tenure
Mariam Jamilah Abdul Jalil Zuriah Abdul Rahman
Article information:
To cite this document:
Mariam Jamilah Abdul Jalil Zuriah Abdul Rahman, (2012),"Sukuk investment", Qualitative Research in
Financial Markets, Vol. 4 Iss 2/3 pp. 206 - 227
Permanent link to this document:
http://dx.doi.org/10.1108/17554171211252538
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
Access to this document was granted through an Emerald subscription provided by 514603 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.
QRFM
4,2/3 Sukuk investment
Comparison of the profits obtained by using
Ijarah and Musharakah Mutanaqisah
206 principles with long-term tenure
Mariam Jamilah Abdul Jalil
Faculty of Information Technology and Quantitative Science,
Universiti Teknologi MARA, Shah Alam, Malaysia, and
Zuriah Abdul Rahman
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
Abstract
Purpose The purpose of this paper is to determine whether the amount of profits gained from
musharakah mutanaqisah model using coupon rate of 4.5 per cent, price at par and tenure of five years
was greater than using ijarah principle where the price is at a discount. Also to compute and compare
the profits obtained from sukuk investment in ijarah and musharakah mutanaqisah for 3.5 per cent
coupon rate and price at par for a sukuk with tenure of 12.5, 15, 17.5 and 19 years.
Design/methodology/approach In total, two models were used to calculate profit. These models
are based on ijarah and musharakah mutanaqisah principles. Formulas are derived from ijarah and
musharakah and mutanaqisah principles used in sukuk.
Findings Sukuk investment using ijarah principle is found to be a better investment alternative
than musharakah mutanaqisah principle, regardless of the number of years of the sukuk, as long as it
is a long-term tenure. However, for short-term tenure, the latter is preferred based on the amount of
profits generated.
Research limitations/implications The formulas and results shown in this research are just one
of the mathematical approaches that can be used for decision making in sukuk investment. There are
other approaches which may deemed to be more effective in decision making. This research was
applied only to ijarah and musharakah mutanaqisah types of investment.
Practical implications The results in the research will assist in making a quick decision on what
type of sukuk investment for the investors and issuers and which will be suitable given the amount of
financial resources and duration of the investment period.
Originality/value Many researchers have attempted to study the implications of using
mathematical formulas to guide decision making on the choice of sukuk investment and this
research has, to a certain extent, concurred with and complemented the works of past researchers.
Additionally it will create awareness and provide more information to potential investors on better
sukuk investment alternative principles from a mathematical point of view.
Keywords Islam, Finance, Investments, Bonds, Profit, Mathematics, Islamic finance, Islamic bonds,
Sukuk, Murabahah, Ijarah, Musharakah mutaniqisah
Paper type Technical paper
money is being used. Investing in conventional bonds is solely for the purpose of
accumulating interest and maximizing profit. The accumulation of interest for floating
coupon bond is according to a rate that is influenced by current market rate, length of the
term and the creditworthiness of the issuer. The rate will change overtime; therefore the
market price of a bond will vary after it is first issued (Wilson, 2004).
Muslims in general, are apprehensive about investing in conventional bond due
to many factors that prohibit Muslims to do so. This prohibition includes such things
as interest (riba), uncertainty (gharar) and transactions in unethical goods and
services, making the contract impermissible for Muslims (Tariq, 2004). Since the
Muslim population in Malaysia is more than 50 per cent, then it is important to have a
shariah-compliant investment option to satisfy their business needs. So, with the
availability of the Islamic bonds which bear no interest and backed by assets owned
by the issuers, Muslims are able to invest with a better peace of mind (Wilson, 2004).
Islamic bonds are called sukuk, which is plural for sakk which means certificate (Cakir
and Raei, 2007). There are many concepts used in sukuk such as ijarah, musharakah,
murabahah, bai bithaman ajil (BBA), istisna and mudharabah, where they are created
to be used for different purposes and tenure. The first sukuk issued in Malaysia was in
1990. In 2007, Malaysia was the worlds leading issuer of Islamic bond. In that year alone,
approximately US$62 billion of Islamic bonds were issued. After the introduction of
Islamic bond, even conventional companies started issuing Islamic bond. The worlds
first ringgit sukuk issuance by a conventional company is SHELL MDS which was
issued in 1990 with the total amount of RM125 million. To date, the largest ever sukuk
issuance is by BINARIANG GSM with the amount of RM15.35 billion in the year 2007
(Malaysia International Islamic Financial Centre (MIFC, 2007)).
The issuance of corporate sukuk (by number of volumes) as of 2008 are 55 per cent
for musharakah, 20 per cent for ijarah, 11 per cent for murabahah, 6 per cent for
mudharabah, 5 per cent for istisna and 3 per cent for BBA.
Below are brief descriptions of the three most popular corporate sukuk in Malaysia.
Musharakah
Musharakah means partnership. Usmani (2007) states that the concept of musharakah is
a form of financing where a few partners enter into an agreement to form an enterprise in
which all the partners share the profits or losses derived from the joint venture. Only the
profits gained are distributed among investors based on an agreed profit sharing ratio.
However, if the business suffers a loss, the losses will be borne by all the investors based
QRFM on the ratio that they invest in Tariq (2004). In sukuk, the investors will form an
4,2/3 enterprise and buy the sukuk from the issuers through a trustee. The management of the
business will be done by the issuers and they will be paid a management fee. The profit
obtained from the joint venture will be distributed to the investors through the
trustee. However, if the business suffers a loss, the issuers have to pay back the investors
(Abdul Rahman, 2008). In financing, musharakah mutanaqisah or diminishing
208 musharakah is an improvised model of musharakah currently available in financing
only. The structure of musharakah mutanaqisah is similar to musharakah, but the
periodic payment include the profit plus cost of buying back the asset as opposed to
musharakah where the periodic payment is to pay only for the profit but this payment
will only be made if the business succeed. Upon maturity, the asset will be fully paid and
owned by the customer (Ahamed Kameel and Dzuljastri, 2009).
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
Ijarah
Ijarah comes from an Arabic word which means leasing. Usmani (2007) explained that
there are two types of ijarah. The first is to employ the services of a person on wages
given to him as a consideration for his hired services. The second is to transfer the
ownership of a property to another person in exchange for a rent claim by him. Even
though the ownership has changed the person renting the property has the right to use
the property as his own. In sukuk, a trustee acting on behalf of the investors will purchase
a leasable asset from the issuer. The trustee will lease the asset back to the issuer base on
the rental that has been agreed upon by both parties. The issuer will then issue sukuk and
will pay the rental fee for a specific period of time. After reaching the maturity date, the
issuer will purchase the asset back based on what is left after deducting the rental fees
(Abdul Rahman, 2008). Zureena (2008) clarified that this principle provides medium to
long-term type of sukuk.
Murabahah
Murabahah in financing is a price deferred sale of a contract (Tariq, 2004). Usmani (2007)
mentioned that in murabahah, a product is sold based on the total cost plus profit where
they can be paid either a lump sum or according to a percentage agreed upon by buyer
and seller. This concept is used mostly for short-term financing (Abdul Rahman, 2008).
In sukuk, the investors buy the sukuk according to the purchase price agreed upon from
the issuers through a trustee. Then, the trustee will sell back the sukuk to the issuers with
the sale price which are the purchase price plus mark-up to be settled on a deferred
payment basis (Abdul Rahman, 2008).
Buying and selling of bonds is based on demand and supply concept. If there is a
demand in certain sukuk principles than the issuers will supply according to the demand.
Therefore, it is important to provide information about sukuk principles and the
calculation of the profits to investors and issuers so that they can make good decision on
which sukuk principle to invest in.
There are not many studies that have been carried out on the performance of sukuk
let alone on musharakah mutanaqisah principle. However, in finance, a few studies have
been carried out in promoting musharakah mutanaqisah principle. According to
Ahamed Kameel and Dzuljastri (2009), by doing a comparison between the BBA and
musharakah mutanaqisah concept showed that the latter concept is much more suitable
and widely accepted by customers and financiers. Customers are more akin to finance
in musharakah mutanaqisah since the value of an asset is based on the market price and Sukuk
the rental payment is based on the market rental values, these values will change during investment
the duration of the tenure. However, in BBA the value of the asset is fixed throughout the
maturity term and the value is based on the interest. The profit obtained from
musharakah mutanaqisah also varies since the rental payment change over time, unlike
BBA where the profit obtained by the financier is fixed. By using the BBA concept the
amount to be paid to the financier is said to be four times the actual cost, this would end 209
up being a burden to the customers. This showed that musharakah mutanaqisah
concept is a better alternative for financing than BBA (Ahamed Kameel and
Dzuljastri, 2009).
Maheran (2006) studied and modified the formula obtained from Shaharir (1989).
From this study she was able to produce a formula that can be used for financing in
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
musharakah mutanaqisah principle. The model obtained from Shaharir (1989) can
actually be used for mudharabah, but Maheran (2006) introduced a new model so that it
can go well with musharakah mutanaqisah principle. There are two profits that will be
obtained by the financier and the entrepreneur by using the musharakah mutanaqisah
principle which are the profits from their investment and the periodic payment.
There are three comparisons that Maheran (2006) used in her studies. The first one
was the comparison between musharakah mutanaqisah model introduced by Shaharir
(1989) and the conventional formula used by banks. She found that the amount of
periodic payment from Shaharir (1989) model was much higher and this would be a
burden to the entrepreneur. The second comparison was between her model and the
model from Shaharir (1989). She discovered that her model gave a lower amount of
periodic payment which reduces the burden on the entrepreneur. The last comparison is
between her model and the conventional model, where the amount of periodic payment
to financier obtained from the new model was also lower than the conventional model.
Hence, she concluded that using musharakah mutanaqisah principle and the new model
is much more reasonable because the profits obtained from the joint venture will benefit
both sides.
Mohd. Noor (2008) adapted the model of musharakah mutanaqisah in financing
introduced by Maheran (2006) into sukuk. He compared the amount of profits obtained
from sukuk investment in musharakah mutanaqisah and BBA and found that
musharakah mutanaqisah gave higher profit. He also concluded that this model is more
beneficial to investors and issuers rather than BBA where it only benefited one party.
Mawarliza (2009) compared the amount of profits obtained from sukuk investment in
ijarah and musharakah mutanaqisah principles. In her study she used the musharakah
mutanaqisah model that was introduced by Maheran (2006) in financing and adapted in
sukuk by Mohd. Noor (2008). The formula for calculating price using ijarah principle was
from Bank Muamalat, Kuala Lumpur. The price was calculated based on the price at
future value and price at present value. From there, the proceeds were determined and
the profit was calculated by taking the difference from the proceeds at future value and
the proceeds at present value. She discovered that the amount of profits gained from
musharakah mutanaqisah model using coupon rate of 4.5 per cent, price at par and
tenure of five years was greater than using ijarah principle where the price is at a
discount.
It would be interesting to see whether the findings of Mawarliza (2009) still hold
for sukuk with long-term tenure, both principles using prices at par, and a 3.5 per cent
QRFM coupon rate. The goal of this research is to compute and compare the profits obtained
4,2/3 from sukuk investment in ijarah and musharakah mutanaqisah for 3.5 per cent coupon
rate and price at par for a sukuk with tenure of 12.5, 15, 17.5 and 19 years. All the data
used in this study is ijarah sukuk issued by Projek Lintasan Shah Alam Sdn. Bhd,
courtesy of RHB Investment Bank Berhad and RHB Islamic Bank Berhad
Kuala Lumpur which are the advisers bank for the issuance of sukuk (Securities
210 Commission Malaysia, 2009). The computation of the profits obtained from ijarah sukuk
investment will be computed according to the amount of profit available in the data.
2. Methodology
In this paper two models were used to calculate profit. These models are based on
ijarah and musharakah mutanaqisah principles.
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
Figure 1.
(1) Sells asset and pays rent (2) Issues bond and pays rent
The structure of ijarah
Issuer SPV Investor
principle used in sukuk
(4) Buys asset back (3) Releases bond
where: Sukuk
S future value of annuity at the end of n interest periods. investment
n number of rental payments.
i interest rate per interest period.
R periodic payments. 211
2.2 Musharakah mutanaqisah principle
2.2.1 Structure of musharakah mutanaqisah principle used in finance. According to
Ahamed Kameel and Dzuljastri (2009), this principle works similar to basic
musharakah. First the investors will form a joint venture and invest with the issuer.
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
The issuers will issue a bond and manage the asset. There are two concepts used in
musharakah mutanaqisah contract. Since both the investors and issuers provide
capital based on the agreed investment ratio then this is a musharakah contract. But in
diminishing musharakah the issuers will have to pay monthly payment to the
investors which is the rental payment, this is the ijarah contract. Upon maturity the
monthly payment and principal amount of the bond will be fully paid and will
eventually end the contract and the asset will change ownership to the issuer. In this
contract, not only the investors will benefit from the joint venture but the issuers will
also receive monthly payment based on the profit sharing ratio (Figure 2).
2.2.2 Formula for musharakah mutanaqisah principle. This model was introduced
by Maheran (2006) for Islamic financing and adapted in Islamic bonds by Mohd.
Noor (2008).
To obtain profits for investors using this model, several formulas will be used:
(1) The amount of periodic payment, B to investors is:
P 0 k1 rt 2 1 P 0
B 3
t1 2 k k1 rt 2 1=r
where t is the number of periods.
(2) Semi-annual profit for investors, Ct at the end of the tth period:
t21 1 rt21
C t rk P 0 1 r 2 B 21 4
r
(3) Release bond and receive principal and profit
Figure 2.
(1) Provide capital (1) provide capital The structure of
Joint venture musharakah mutanaqisah
(asset) principle
QRFM (3) Accumulated profit for investors, Ut at the end of tth period:
4,2/3 t 1 rt 2 1
U t k P 0 1 r 2 1 2 B 2t 5
r
where:
212 P0 face value.
k profit sharing ratio.
r profit rate on a single semi-annual payment.
3. Implementation
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
RM115,000,000.00 19
Table I. RM35,000,000.00 17.5
Data description of ijarah RM10,000,000.00 15
sukuk issued by Projek RM5,000,000.00 12.5
Lintasan Shah Alam
Sdn. Bhd Source: RHB Kuala Lumpur
money market rates where the negotiable instrument deposit rate is 2.25 per cent Sukuk
per annum and is assumed to be the same throughout the tenure. The reason this
particular rate was used was because this investment rate contained only one
investment
package compared to all other rates that have lots of different packages to choose
from. We also assumed the profits that are collected twice a year will also be
reinvested twice a year so, the rate will be divided by two.
.
To calculate the future value of annuity earned by investors using equation (2): 213
2:25%
n 30 i 1:125% R RM175; 000
2
1 0:0112530 2 1
S 175; 000 RM6; 203; 576:35
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
0:01125
The accumulated profit at the end of 15 years per unit of sukuk is:
6; 203; 576:35
S RM62:04
100; 000
In this section, the computation of rental payment and accumulated profit earned by
investors are only for the tenure of 15 years. The computation of rental payment and
accumulated profit earned by investors for all other tenures is available in Appendix 1.
RM5:1703
0:028100 RM2:8
This formula will also be used to calculate the semi-annual profit for investors
214 until the 30th period.
.
To calculate the accumulated profit for investors using equation (5) for t 1:
P 0 RM100 k 0:8 r 3:5% t 1
1 1 0:0351 2 1
U 1 0:8 1001 0:035 2 1 2 5:170255891 21
0:035
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
0:028100 RM2:8
This formula will also be used to compute the accumulated profit for investors
until the 30th period.
In this section, the calculations of profit and accumulated profit for musharakah
mutanaqisah sukuk are shown for the tenure of 15 years at the end of the first period
only. The detailed computations of other components needed in the computation of
profit under the same principle for the first period are available in Appendix 3. A more
comprehensive result for the computation of the profits for all tenures is available in
Appendix 4.
Tenure Profit
The graph in Figure 3 showed that as the year increases the accumulated profit
obtained by investors will also increase. We can also see that as the tenure gets longer
the difference between the profits using sukuk ijarah and musharakah mutanaqisah
gets bigger. This graph suggested that sukuk investment using ijarah principle is a
better investment alternative than musharakah mutanaqisah principle regardless of
the number of years of the sukuk as long as it is a long-term tenure.
Since this project is a continuation of the study done by Mawarliza (2009) we used
the result obtained in her study which indicated that the graph may intersect after five
years. This intersection was taken into account and we constructed a similar study but
with long-term tenure. The graph from Figure 3 suggested that the results from this
study is compatible with the assumption made that the accumulated profit for sukuk
ijarah is higher than musharakah mutanaqisah.
80.00
75.00
216 70.00
RM
65.00
60.00
55.00
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
50.00
45.00
Figure 3. 40.00
Graph of accumulated 12.5 15 17.5 19 years
profit for ijarah and
musharakah mutanaqisah Ijarah Principle Musharakah
principle Mutanaqisah
Principle
regardless of the number of years the sukuk was issued. The result that was obtained
in this study also showed that the result discovered by Mawarliza (2009) is
complementary to each other.
In conclusion, if the investors are looking for a long-term investment the better
investment alternative is using sukuk issued under the ijarah principle. However, if the
investors are looking to invest in sukuk with short-term tenure a better investment
alternative is using the musharakah mutanaqisah principle as suggested by Mawarliza
(2009). We hope that the results obtained in this research will create awareness and provide
more information to potential investors on a better sukuk investment alternative principle
from a mathematical point of view.
The formulas and results shown in this project are just some of the mathematical
approach that can be used for decision making in sukuk investment. There are many
other studies that can be done to help out investors and also issuers. For future studies,
we recommend comparison between ijarah and musharakah mutanaqisah principles for
sukuk investment using different prices. There are also other principles that can be
ventured in where comparison can be done and try to find the formulas for that particular
principle that are being used in the sukuk market. Besides that, other researchers can also
take into consideration the economic factors that can influence the demand of sukuk.
References
Abdul Rahman, Y. (2008), Islamic Finance, Shariah-Compliant Product & Sukuk, Cagamas Bhd,
Kuala lumpur.
Ahamed Kameel, M. M. and Dzuljastri, A.R. (2009), Home financing through the musharakah
mutanaqisah contract: some practical issues, Journal of King Abdulaziz University:
Islamic Economics, Vol. 22 No. 1, pp. 3-27, available at: http://islamiccenter.kaau.edu.sa/
arabic/Magallah/Pdf/22_1/22-1-A-Meera_06.pdf
Ayub, M. (2007), Securitization, Sukuk, and Fund Management Potential to be Realized by Islamic Sukuk
Financial Institutions, available at: http://islamiccenter.kaau.edu.sa/7iecon/Ahdath/
Con06/_pdf/Vol2/48MuhammadAyubSecuritization,Sukuk.pdf investment
Cakir, S. and Raei, F. (2007), Sukuk vs Eurobonds: is there a difference in value-at-risk,
available at: www.scribd.com/doc/3976253/Sukuk-vs-Eurobonds
Fabozzi, F.J. (2000), The Handbook of Fixed Income Securities, available at: http://books.google.
com.my/books?idjup2d1pEyWcC&pgPA4&lpgPA4&dqmaturitytermin 217
bonds&sourcebl&otswJTSFqp7eR&sigtxZt461lIAQnUrAH42nbGdorlIc&hlen&
eido_nStjgPJeCkAXJs5nFBg&saX&oibook_result&ctresult&resnum7&ved
0CBsQ6AEwBg#vonepage&qmaturity%20term%20in%20bonds&ffalse
Kya, L.T. and Kiang, W.K. (1996), Accountancy Mathematics for ITM, Fajar Bakti Sdn Bhd,
Kuala Lumpur.
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
Maheran, M.J. (2006), Model matematik pelaburan musyarakah dan mutanaqisah, doctoral thesis,
Universiti Kebangsaan Malaysia, Bangi.
Mawarliza, M.Z. (2009), Comparison of the profit obtained from investment in sukuk by using
ijarah and musharakah mutanaqisah principles, Bsc Technical Report, Faculty of
Computer and Mathematical Sciences, Universiti Teknologi MARA, Shah Alam.
MIFC (2007), Financial Stability and Payment Systems Report 2007, Bank Negara Malaysia,
available at: www.mifc.com/index.php?chcat_int_sukuk&pgcat_int_sukuk_over&
tptmifc_2008#
Mohd. Noor, M. (2008), Managing Islamic bonds using musharakah mutanaqisah model, Bsc
Technical Report, Faculty of Computer and Mathematical Sciences, Universiti Teknologi
Mara, Shah Alam.
RHB Banking Group (2010), Money market rates, available at: www.rhb.com.my/rate_charges/
money-market/mm_main.html
Securities Commission Malaysia (2009), available at: www.sc.com.my/SC/download1.asp?
docId787&docTypePTC
Shaharir, M.Z. (1989), Pinjaman secara Islam: Satu alternatif, Isu Pengurusan, Vol. 1 No. 1,
pp. 3-11.
Tariq, A.A. (2004), Managing financial risks of sukuk structure, Masters dissertation,
Loughborough University, Loughborough, available at: www.sbp.org.pk/departments/
ibd/sukuk-risks.pdf
Usmani, M.T. (2007), An Introduction to Islamic Finance, Maktaba Maariful Quran, Karachi.
Wilson, R. (2004), Islamic bonds: your guide to issuing, structuring and investing in sukuk
overview of the sukuk market, available at: www.scribd.com/doc/3825436/Overview-of-
the-Sukuk-Market
Zureena, M. (2008), Sukuk A Brief Introduction, Azmi & Associates, Kuala Lumpur, available at:
www.azmilaw.com.my/Article/Article_10_&_11/Article_10_SUKUK_00101904_.pdf
Appendix 1
Below are calculations using ijarah principle for tenure of 12.5 years that are used in this project
but were not shown above:
.
To calculate the rental payment earned by investors using equation (1):
The accumulated profit at the end of 12.5 years per unit of sukuk is:
2; 509; 936:55
S RM50:20
50; 000
Below are calculations using ijarah principle for tenure of 17.5 years that are used in this project
but were not shown above:
.
To calculate the rental payment earned by investors using equation (1):
2:25%
n 35 i 1:125%R RM612; 500
2
1 0:0112535 2 1
S 612; 500 RM26; 093; 822:92
0:01125
The accumulated profit at the end of 17.5 years per unit of sukuk is:
26; 093; 822:92
S RM74:55
350; 000
Below are calculations using ijarah principle for tenure of 19 years that are used in this project
but were not shown above:
.
To calculate the rental payment earned by investors using equation (1):
2:25% 219
n 38 i 1:125% R RM2; 012; 500
2
1 0:0112538 2 1
S 2; 012; 500 RM94; 768; 817:18
0:01125
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
The accumulated profit at the end of 19 years per unit of sukuk is:
94; 768; 817:18
S RM82:41
1; 150; 000
Appendix 2
There are certain formulas used in this project but were not mentioned earlier. Below are some
formulas that are used for musharakah mutanaqisah principle:
.
The total amount of investment at the end of the tth period:
H t H 0 1 rt21 A1
.
The amount of issuers investment at the end of the tth period:
Qt Q0 1 rt21 A2
.
The amount of semi-annual investment payment at the end of the tth period:
1 rt21 2 1
Wt B A3
r
.
The amount of semi-annual profit for issuers at the end of the tth period:
1 rt21 2 1
Dt r1 2 k P 0 1 rt21 2 B A4
r
.
The amount of accumulated profit for issuers at the end of tth period:
1 rt21 2 1
M t 1 2 k P 0 1 rt21 2 1 2 B 2t A5
r
.
The amount of semi-annual principal at the end of tth period:
St B 2 Ct A6
.
The balance of issuers equity at the end of t payment period:
1 rt 2 1
Qt Q0 tB 2 P 0 k1 rt 2 1 Bk 2t A7
r
QRFM .
The balance of investors equity at the end of t payment period:
4,2/3 1 rt 2 1
E t P 0 k1 rt 2 1 1 2 tB Bk 2t A8
r
Appendix 3
220 Below are a few calculations that were used for musharakah mutanaqisah principle with tenure
of 15 years but were not shown above:
.
To calculate the total amount of investment using equation (A1):
H 0 RM120:00 t 1 r 0:035
Downloaded by FREIE UNIVERSITAT BERLIN At 15:06 12 May 2015 (PT)
Q0 RM20:00 t 1 r 0:035
B 5:170255891 t 1 r 0:035
1 0:035121 2 1
W 1 5:170255891 RM0
0:035
.
To calculate the amount of semi-annual profit for issuers using equation (A4):
B 5:170255891 t 1 r 0:035 P 0 100 k 0:8
1 0:035121 2 1
D1 0:0351 2 0:8 1001 0:035121 2 5:170255891
0:035
RM0:7
.
To calculate the amount of accumulated profit for issuers using equation (A5):
RM0:7
.
To calculate the amount of semi-annual principal using equation (A6):
B 5:170255891 C 1 2:8
5:1702558910:8 21 RM97:6297
0:035
Appendix 4
Musharakah mutanaqisah principle tenure of 12.5 years using formulas mentioned in
methodology and Appendix 2 is shown in Table AI.
Musharakah mutanaqisah principle tenure of 15 years using formulas mentioned in
methodology and Appendix 2 is shown in Table AII.