Goods costing ৳3 lakh at a 10% yearly markup over 12 monthly instalments have a sale price of ৳3,30,000 and an instalment of ৳27,500; on the amount still owed that equals about 17.97% a year. Try your own figures below.
৳
= 3 lakh taka
%
The rate applies
months
= 1 year
How you pay
Monthly instalment
৳27,500
12 instalments
Purchase cost
৳3,00,000
Bank's profit
৳30,000
Sale price (total you pay)
৳3,30,000
Equivalent yearly rate
17.97%
Effective yearly rate
19.53%
Goods costing ৳3,00,000 at a 10% markup over 1 year have a sale price of ৳3,30,000 and a monthly instalment of ৳27,500; on the amount still owed that equals about 17.97% a year.
In Murabaha the bank buys the goods and sells them to you at a fixed price including its profit, agreed at signing. The equivalent rate is only for comparison — it is not an interest rate. Rules and fees differ by bank.
How this was calculated
Profit = ৳3,00,000 × 10% × 1 (in years) = ৳30,000
Sale price = ৳3,00,000 + ৳30,000 = ৳3,30,000
Monthly instalment = ৳3,30,000 ÷ 12 = ৳27,500
The profit is set on the full cost while instalments reduce what you owe, so the equivalent rate on the amount owed is about 17.97% a year
Enter the purchase cost (what the bank pays for the goods).
Enter the bank's profit rate and whether it is per year or for the whole term.
Choose the term, and monthly instalments (Murabaha) or one payment at the end (Bai-Muajjal).
See the sale price, the payment and an equivalent yearly rate for comparison.
How it is worked out
Profit = cost × markup (× term in years when the rate is per year)
Sale price = cost + profit
Monthly instalment = sale price ÷ number of instalments; with Bai-Muajjal the whole sale price is paid once at the end
Equivalent yearly rate: solved from the payment flows (IRR), only for comparison
Examples
Cost
Markup
Term
Payment
Sale price
Instalment
Equivalent yearly rate
৳3,00,000
10% a year
12 months
monthly
৳3,30,000
৳27,500
about 17.97%
৳2,00,000
10% a year
24 months
monthly
৳2,40,000
৳10,000
about 18.16%
৳1,00,000
10% in total
12 months
one payment
৳1,10,000
৳1,10,000
10%
With one payment at the end the whole amount is owed for the whole term, so a 10% total profit over 12 months equals exactly 10% a year. With instalments what you owe keeps falling, so the equivalent rate comes out close to double.
Good to know in Bangladesh
Uses: Islamic banks use Murabaha for business stock, machinery and consumer goods; Bai-Muajjal is common for traders buying on deferred payment.
Profit rates differ by bank: the 10% filled in is only an example — enter your bank’s offer.
Other costs: processing, insurance and documentation are separate.
More: Murabaha vs a conventional loan
A conventional loan lends money and interest grows with time. In Murabaha the bank first owns the goods and then sells them at a profit; once agreed, the price never changes, even if you pay late. That structural difference is the core point in Islamic finance. The equivalent yearly rate is shown only to make comparison easy.
Frequently asked questions
What is Murabaha?
Murabaha is a cost-plus sale: the bank buys the goods you need and sells them to you, disclosing its cost and a set profit. The price is fixed at signing and never rises. Paid in instalments it is Murabaha; paid in one go later it is usually called Bai-Muajjal.
Why is the equivalent yearly rate higher than the quoted markup?
The profit is set on the full cost, while your instalments steadily reduce what you owe. Measured on the amount actually owed, the rate comes close to double. It is shown only to compare offers.
Does the price go up if I pay late?
No, the Murabaha price is fixed. Many banks charge a late-payment penalty that goes to charity rather than to the bank's income. Check the contract.
Do I get a discount for paying early?
Because the price is fixed by contract a discount isn't required, but many banks give one voluntarily (ibra). Ask your bank.
What is the difference between 'per year' and 'for the whole term'?
10% per year over a 2-year term means a profit of 20% of the cost; 10% for the whole term means 10% however long the term is. Match the option to how your bank words its offer, or the sale price will be far off.
Also searched as
murabaha calculator · bai muajjal calculator · islamic bank investment instalment · মুরাবাহা হিসাব