CALCULATING PROFIT SHARING iB

Profit sharing in Islamic banks - Perbankan Syariah - use the term profit sharing ratio, that is the proportion of profit sharing between the customer and the Islamic bank. For example, if customer service Islamic banks offer profit sharing ratio of 65:35 iB Savings. That means customers of Islamic banks would get the result by 65% of the investment return generated by the Islamic banks through the management of public funds in the real sector. Meanwhile, Islamic banks would get a portion of revenue sharing by 35%.How to calculate the revenue sharing? 

 

For financing products / deposits of Islamic banks, such as Savings iB and Deposit iB, the determination of the profit sharing ratio is influenced by several factors: the type of deposit, the estimated investment income and bank operational costs. Only iB deposit products with an investment scheme (mudaraba) who get the return for the results. Meanwhile, for deposit products iB with deposit scheme (wadiah), return that was given in the form of bonuses.

First of all calculates the level of investment income that can be distributed to customers. Expected investment income is calculated by Islamic banks to look at the performance of economic activity in sectors that become an investment destination, for example in the property sector, trade, agriculture, telecommunications or transportation sectors. Each economic sector has different in characteristics and performance, so will provide investment returns in different as well. As befits a manager of investment, Islamic banks will use a variety of economic and financial indicators that can reflect the performance of the sector is to calculate the expectations / projections of investment returns. Including historical indicators (track record) from investing activities of Islamic banks has been done, as reflected by the average value of all types of financing iB that had been given to the real sector. From the calculation, it can be obtained from the amount of investment income in the form of equivalent rate-that will be distributed to customers for example by 11%.

Furthermore, calculated the amount of investment income which is a section forIslamic banks themselves, to cover operational costs while providing a reasonable income. The amount of operating costs depending on the level of efficiency of each bank. Meanwhile, a fair amount of revenues, among others, refer to the financial indicators of Islamic banks in question such as ROA (Return On Assets) and other relevant indicators. From the calculation, shows that Islamic banks requires investment income, which also counted in the equivalent rate-for example at 6%.

From both these figures, then the profit sharing ratio can be calculated. The portion of the results for our customers is: [11% divided (11% +6%)] = 0.65 or 65%. And for the results to Islamic banks amounted to: [6% divided (11% +6%)] = 0:35 or 35%. So the ratio for the results then can be written as 65:35.

Of course, in practice iB customers not need bother with a difficult calculation for the results of this kind. Society just ask how many rate indicative of the Savings Deposit iB iB or she is interested. Rate this indicative rate is the equivalent value of the investment income will be distributed to customers, expressed as a percentage eg 11% or 8% or 12%. So the community with a fast and easy to calculate how much profit to be earned in the savings and invest in Islamic banks. Very easy isn’t it?

quoted from www.bi.go.id

Make Business Out of Foreclosed Homes

At first glance, the prospect does not seem to spoil for those wishing to start their own business on the side while holding day jobs. It also may seem risky for those who want to jump into the business of selling real estate full time since the hotel was the former.

home for sale

Small-time investors to seek gold in the economy is bad, if you have a financial IQ can help sniff the good from the bad. When the bad economy at the beginning of 1990, Robert Kiyosaki Rich Dad, Poor Dad fame does not go directly to the local real estate office. Instead, he went to the office to find a bankruptcy lawyer in negotiating transactions taken over the house could easily sell it again in 90 days. The reason I chose to households in difficulty is that these properties are often sold at lower prices, about 30 percent less than their market value. All he had was subtle, simple way to finance standards, research, and a lot of guts to back him in his business.

Some smart people tend to keep their jobs and real estate flipping in his spare time. A small transaction is taken over the house to produce a few thousand dollars, and investors after they make the company grow into a full time hobby.

Rentals

How others can make money from seizures is through leasing. A good way to increase personal income from their work day is to have a steady cash flow of small houses can be rented. This is especially attractive to families or individuals who work and still can not commit to buying their own homes because the economy is bad.

When the benefits of the housing market is up, that are rented the same house could be sold, even for twice the price paid by buyers of bad moments. Everything is a matter of time and a good eye for business.

This scheme can be repeated again and again when people take a second look over the house.

Fixed Rate Secured Loans

Some time we need loans from friends, family or financial institutions such as banks. These loans can be for investment purposes, school fees, fees for medical treatment, purchase houses, purchase of vehicles and other financing.

When we decide to use banking services in financing our needs, then one thing of our concern is the bank interest. Each bank offers loans with varied interest rates. Some offer fixed rate and the other offer floating rate. Each offer has its own advantages respectively.

In a system of floating rate bank usually offers low interest in a certain time, for example the first year, and then use the floating system. In this system there is no certainty in interest rates after the fixed rate period ends. When the economy is good and stable condition, usually it is advantageous for the borrower, while in an unstable economic situation this could be a boomerang for the lender.

The system of fixed interest payments due to better ensure the sustainability of debt repayments and interest are not affected by economic conditions. Although the interest rate offered is usually higher than the floating rate system but this is safer for borrowers.

Each option has risks respectively. In addition to the interest system, there is also the sharia system more friendly for the borrower, although not so popular in the community. Every person has the choice of each and all of them back on their personal.

Fast Loan or Payday Loan

Finding Money is difficult for some of people, but managing money well is much more difficult. Many people who have high income, but their money is not managed well so quickly exhausted and can not be saved. Every one should have a savings account for emergencies needed when there are problems such as sickness, accident and others.

Tiadak For some people who have savings for things mendeak, must seek a solution to get money quickly. One of them is a Fast loan or payday loan. This is one way when other methods such as loans to friends or relatives is not possible anymore. So fast loan can be one solution to your finances.

Fast Loan (paydayloan)

Fast loan can be obtained from the lending firm. Unlike the banks that require a long process for approval, from lending firm you will get approval on the spot after you fill out the online form. If your application is approved, then your loan money will be transferred to your account within 24 hours after approval.

The need for fast payment requires fast loan. So there is little time to evaluate the paying capacity, credit standing, or financial status of the person. The only guarantee that lenders have is that the person will receive the paycheck in a few days time. In this regard, the payday loan as a fast loan is derived from the idea that the loan will be paid upon payday. Lenders then require that applicants provide the bank account where they receive their paycheck so they can readily debit the amount of the loan plus its interest and charges.

Overall, fast loans are short-term loans secured with the person’s paycheck. It is then important that the person has a job that guarantees immediate payment of the loan.  The use of a loan should be to meet obligations that require fast payment.

How do lenders decide how much you can borrow for a mortgage?

When you take out a mortgage loan for buying a house, the monthly payments comprise a considerable portion of your overall monthly financial obligations. Most borrowers often ask the question “how much can I borrow for a mortgage” to themselves. Knowing this is absolutely important since the recent housing market dilemma has forced many lenders to make the lending guidelines tighter. Means here you need to research that what is the actual condition of the mortgage market. Here another important thing you need to know that is refinance mortgage interest rates. If in future it is required then your knowledge will help you.

While lenders decide how much they should offer you as a loan, they take into consideration factors like your debt-to-income ratio and the amount of down payment you can make.

The answer to the frequently asked question “how much can I borrow for a mortgage” varies from one borrower to another. Your housing payments are an important expense in your budget. For majority of borrowers, the monthly mortgage payment is their biggest expense till the time their loan is fully paid off. When you question a financial advisor how much you can borrow for a loan, the first thing he will ask is “how much do you make each month?”

The question that will immediately follow is “what other financial obligations do you have?”



Your monthly payments on credit cards, auto loan and personal loan can consume the money that you’d have otherwise utilized to repay your home loan. When you’re looking for the answer to the question “how much can I borrow for a mortgage”, it essentially means how much extra you can borrow over your existing debts.

Last but not least, a lender would be keen to know about the amount of down payment you’re able to make.

Your debt-to-income ratio

When you can work out how much you make each month, it’s simpler for you to answer the question how much you should borrow. The rule of thumb is that your mortgage payments shouldn’t be more than 28% of your gross monthly income and it’s otherwise expressed through a formula known as the front end ratio. If you can maintain the monthly payments of a loan under 28% of your gross monthly income, it’s sensible to go ahead with that loan. Since you can’t regulate the interest rate, you can do this by modifying the loan amount.

The guideline for the back-end ratio is that your total debt payments shouldn’t surmount 36% of your gross monthly income. If they do, then lenders become suspicious about your repayment ability and hesitate to offer a loan to you.

Your down payment

While looking for a home loan, it is recommended that you save enough money for a down payment of 20% or more if possible. If you make a down payment of less than 20%, then you would be asked to buy private mortgage insurance. Lenders would be reluctant to offer you a big loan amount if you can’t make a good down payment. The simple reason is that making a hefty down payment can lower your interest rate and monthly payments and it becomes easier for you to pay off the loan. Lenders take into account the amount of your down payment similarly as how much you earn to decide the amount they should lend you.

Understanding how much you can borrow for a loan before applying for a loan helps you prevent unforeseen financial dilemma in the future.

MUSYARAKAH

MUSYARAKAH Financing is a provision of funds or claims in the form of:

1. profit sharing transaction in the form of Mudharabah and Musyarakah;
2. leasing transaction in the form of Ijarah or lease and purchase transaction in the form of Ijarah Muntahiyah bit Tamlik;
3. sale and purchase transaction in the form of Murabahah, Salam, and Istishna’;
4. lending transaction in the form of Qardh; and
5. leasing transaction in the form of Ijarah for multi service financing;
   

based on agreement between Islamic Bank and/or Islamic Business Unit and another party obligating he party receiving financing and/or facility of funds to repay the funds after a specific term with additional return in the form of ujroh, without additional return or profit sharing.

Contract

Musyarakah Transaction of investment from two or more fund and/or goods owners to conduct a specified business activity in compliance with sharia principles, with a division of profit between those parties based on ratio agreed in advance while division of loss will be based on capital proportion of each party.

Feature and Mechanism

1. Bank and customer shall act as business partners and provide funds and/or goods in order to finance a specified business activity;
2. Customer shall act as business manager and Bank being business partner will be able to participate in the management of business activity in accordance with tasks and authorities agreed in advance such as to review and to request evidence related to business performance report based on the reliable supporting documents;
3. Profit sharing ratio from the fund management shall be specified in the agreed ratio in advance;
4. The agreed ratio of profit sharing may not be changed in the course of investment period, unless upon mutual agreement of both parties;
5. Financing based on Musyarakah contract will be provided in the form of cash and/or goods and not in the form of receivables or claim;
6. In the event where financing based on Musyarakah contract is provided in the form of cash, the amount must be clearly stated;
7. In the event where financing based on Musyarakah contract is provided in the form of goods, the concerned goods must be appraised based on market value (net realizable value) and the amount must be clearly stated;
8. The terms of financing based on Musyarakah contract, fund repayment and profit sharing ratio shall be determined in accordance with the agreement between Bank and customer;
9. Repayment of financing based on Musyarakah contract is conducted in two ways: by installment or bullet payment based on the term of financing based on Musyarakah contract;
10. Profit sharing is conducted based on the business report with the reliable supporting document; and
11. Bank and customer shall bear any loss on business activity on pro rata basis in accordance with the portion of capital of each party.
    

Objective/Benefit

1) For Bank

• as one of the forms in financing
• earning revenue in the form of profit sharing by referring to the revenues of the business under their management.
  

2) For Customer

• fulfilling the need of business capital through bank partnership system.

Risk Analysis and Identification

• Credit risk due to customer’s default
• Market Risk due to the movement of exchange rate if financing based on Musyarakah agreement is provided in foreign currency.
• Operational Risk due to internal fraud such as incorrect record of outstanding value, bribery, inconformity of tax reports (intentionally), errors, manipulation and marking up in accounting and reporting.
  

MUDHARABAH

TIPE OF MUDHARABAH CONTRACT:
1. Mudharabah is Unrestricted Mudharabah.
2. Mudharabah Muthlaqah is Restricted Mudharabah in type of business, tenor, and place in accordance with the requirement of fund owner

FEATURE AND MECHANISM
1. Bank shall act as fund owner (shahibul maal) that provides funds for working capital, and customer shall act as fund manager (mudharib) in the business activities;
2. Bank shall retain rights in the supervision and development of customer’s business even though it shall not directly participate in the management of customers business activities. For example, Bank is entitled to review and to request evidence related to business report based on reliable supporting documents;
3. Profit sharing ratio from fund management shall be specified in advance;
4. The agreed ratio of profit sharing may not be changed in the course of investment period, unless upon mutual agreement of both parties;
5. Term of financing based on Mudharabah, fund repayment and profit sharing ratio shall be determined in accordance with the agreement between Bank and customer;


6. Financing based on Mudharabah agreement will be provided in cash and/or goods and not in the form of receivables or claims;
7. In the event where financing based on Mudharabah agreement is provided in the form of cash, the amount must be clearly stated;
8. In the event where financing based on Mudharabah agreement is provided in the form of goods, the concerned goods must be appraised based on market value (net realizable value) and the amount must be clearly stated;
9. Repayment of financing based on Mudharabah agreement is conducted in two ways: in installment or bullet payment based on the term of financing based on Mudharabah agreement;
10. Profit sharing is conducted by referring to the business report with the reliable supporting document; and
11. Loss of customer’s business that can be borne by Bank as fund owner (shahibul maal) is maximum the same amountas the financing provided (ra’sul maal).

OBJECTIVE/BENEFIT
1. For Bank
a. as one of the forms in financing;
b. earning revenue in the form of profit sharing in accordance with the business performance managed by customer
2. For Customer
ulfilling the need of business capital through bank partnership system

RISK ANALYSIS AND IDENTIFICATION
1. Credit Risk due to customer’s default;
2. Market Risk due to the movement of exchange rate if the financing based on Mudharabah agreement is provided in foreign currency;
3. Operational Risk due to internal fraud such as incorrect record of outstanding value, bribery, inconformity of tax reports (intentionally), errors, manipulation and marking up in accounting and reporting.

Financing

Financing is a provision of funds or claims in the form of profit sharing transaction (in the form of Mudharabah and Musyarakah), leasing transaction (in the form of Ijarah or lease and
purchase transaction in the form of Ijarah Muntahiyah bit
Tamlik), sale and purchase transaction (in the form of Murabahah,
Salam, and Istishna), lending transaction (in the form of Qardh), leasing transaction (in the form of Ijarah for multi servicefinancing).



based on agreement between Islamic Bank and/or Islamic Business Unit and another party obligating the party receiving financing and/or facility of funds to repay the funds after a specific term with additional return in the form of ujroh, without additional return or profit sharing
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