Quick Answer
Murabaha is an Islamic financing structure: Sale Price = Cost + (Cost × Markup%). Monthly instalment = Sale Price ÷ Number of months. Unlike an interest-bearing loan, the price is fixed upfront, no compounding, no late interest.
What Is Murabaha Calculator?
Murabaha is a cost-plus financing arrangement: the bank buys an asset at market cost, then sells it to the customer at a declared profit margin. The customer repays in instalments at the pre-agreed fixed total price.
Murabaha is permissible under Islamic law while a conventional loan is not because the bank earns its return through a genuine trade transaction (buying then selling the asset), not through charging interest (Riba) on money lent. Crucially, the total price is fixed at signing, it cannot increase regardless of late payments.
This calculator follows AAOIFI Shariah Standard No. 8 (Murabaha to the Purchase Orderer), published by the Accounting and Auditing Organization for Islamic Financial Institutions, the internationally recognized Islamic finance standard-setting body whose standards are used by institutions in over 45 countries.
How to Use
- 1Enter the cost price of the asset the bank purchases on your behalf.
- 2Enter the bank's declared profit markup percentage.
- 3Enter the number of monthly instalments for repayment.
- 4The calculator shows total Murabaha price, monthly instalment, and profit amount.
Formula
Sale Price = Cost + (Cost × Markup%)Monthly = Sale Price ÷ Number of monthsProfit = Sale Price − CostExample: Car costing PKR 3,000,000 with 12% markup over 36 months
- Murabaha price = 3,000,000 + (3,000,000 × 12%) = 3,360,000
- Monthly = 3,360,000 ÷ 36 = 93,333
Tips & Things to Know
- Murabaha total cost is fixed, paying early doesn't reduce the total (though some banks grant a voluntary discount).
- Murabaha is for asset financing (cars, property, equipment), not for revolving credit or cash loans.
- Ensure the bank genuinely purchases the asset before selling it to you, a paper transaction without real ownership is not permissible.
- To compare Islamic and conventional financing fairly, use Total Cost (Murabaha sale price vs total interest-bearing loan repayment), not the monthly instalment, which can be misleading.
- Diminishing Musharakah is an alternative Islamic structure for home finance: the bank and customer co-own the property; the customer gradually buys out the bank's share while paying rent on the remaining bank portion.
- A Murabaha profit rate can be approximated as an annual rate: Markup% × 12 ÷ Repayment Months. A 10% markup over 24 months ≈ 5% p.a. effective, compare this with conventional loan APR before deciding.