Qualitative Research in Financial Markets

Sukuk investment: Comparison of the profits obtained by using Ijarah and Musharakah
Mutanaqisah principles with longterm tenure
Mariam J amilah Abdul J alil Zuriah Abdul Rahman
Article information:
To cite this document:
Mariam J amilah Abdul J alil Zuriah Abdul Rahman, (2012),"Sukuk investment", Qualitative Research in
Financial Markets, Vol. 4 Iss 2/3 pp. 206 - 227
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Users who downloaded this article also downloaded:
Rodney Wilson, (2008),"Innovation in the structuring of Islamic sukuk securities", Humanomics, Vol. 24 Iss
3 pp. 170-181
M.M. Metwally, (1997),"Economic consequences of applying Islamic principles in Muslim societies",
International J ournal of Social Economics, Vol. 24 Iss 7/8/9 pp. 941-957
AbulHasan M. Sadeq, (1996),"Ethico#Economic Institution of Zakah: An Instrument of Self#Reliance and
Sustainable Grassroot Development", Humanomics, Vol. 12 Iss 2 pp. 47-69
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Sukuk investment
Comparison of the prots obtained by using
Ijarah and Musharakah Mutanaqisah
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
Arshad Ayub Graduate Business School, Universiti Teknologi MARA,
Shah Alam, Malaysia
Abstract
Purpose The purpose of this paper is to determine whether the amount of prots gained from
musharakah mutanaqisah model using coupon rate of 4.5 per cent, price at par and tenure of ve years
was greater than using ijarah principle where the price is at a discount. Also to compute and compare
the prots 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 prot. 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
prots 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
nancial 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, Prot, Mathematics, Islamic nance, Islamic bonds,
Sukuk, Murabahah, Ijarah, Musharakah mutaniqisah
Paper type Technical paper
1. Introduction
What is a bond? The party that issues the bond is called the issuer and the one that
buys the bond is called the investor (Abdul Rahman, 2008). Occasionally a trustee
which is a special purpose vehicle (SPV) is formed solely for the purpose of managing
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1755-4179.htm
QRFM
4,2/3
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Qualitative Research in Financial
Markets
Vol. 4 No. 2/3, 2012
pp. 206-227
qEmerald Group Publishing Limited
1755-4179
DOI 10.1108/17554171211252538
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the bond issuance (Ayub, 2007). A bond is issued in a form of a certicate with the face
value of RM100 and can be sold at par, discount or premium. Some basic features of a
bond is the coupon or interest rate; which can be xed or oat and the maturity date;
which can either be long-term, intermediate or short-term (Fabozzi, 2000). According to
Fabozzi (2000), short-term tenure is between one and ve years, intermediate term is
between ve and 12 years and long-term tenure is more than 12 years. The issuance of
the bonds can be done in any currencies and they are issued mainly for the purpose of
getting nancial aid to put together certain projects.
In the Malaysian capital market, there are two different types of bond that are being
issued which are conventional bonds and Islamic bonds. Conventional bonds work
similar to that of a loan in the sense that they are mainly just paper that investors pay for
but there are no assets to back the bonds and the investors are not aware of how their
money is being used. Investing in conventional bonds is solely for the purpose of
accumulating interest and maximizing prot. The accumulation of interest for oating
coupon bond is according to a rate that is inuenced by current market rate, length of the
termand the creditworthiness of the issuer. The rate will change overtime; therefore the
market price of a bond will vary after it is rst 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 certicate (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 rst sukuk issued in Malaysia was in
1990. In2007, Malaysia was the worlds leadingissuer of Islamic bond. Inthat 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
rst 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 formof nancing where a fewpartners enter into an agreement to forman enterprise in
which all the partners share the prots or losses derived fromthe joint venture. Only the
prots gained are distributed among investors based on an agreed prot sharing ratio.
However, if the business suffers a loss, the losses will be borne by all the investors based
Sukuk
investment
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on the ratio that they invest in Tariq (2004). In sukuk, the investors will form an
enterprise and buy the sukuk fromthe issuers through a trustee. The management of the
business will be done by the issuers and they will be paid a management fee. The prot
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 nancing, musharakah mutanaqisah or diminishing
musharakah is an improvised model of musharakah currently available in nancing
only. The structure of musharakah mutanaqisah is similar to musharakah, but the
periodic payment include the prot plus cost of buying back the asset as opposed to
musharakah where the periodic payment is to pay only for the prot 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).
Ijarah
Ijarah comes from an Arabic word which means leasing. Usmani (2007) explained that
there are two types of ijarah. The rst 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 propertyas his own. In sukuk, a trustee acting onbehalf of the investors will purchase
a leasable asset fromthe issuer. The trustee will lease the asset back to the issuer base on
the rental that has beenagreed upon bybothparties. The issuer will thenissue sukuk and
will pay the rental fee for a specic 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) claried that this principle provides medium to
long-term type of sukuk.
Murabahah
Murabahah in nancing 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 prot 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 nancing (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 thanthe issuers will supply according to the demand.
Therefore, it is important to provide information about sukuk principles and the
calculation of the prots 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 nance, a fewstudies 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 nanciers. Customers are more akin to nance
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in musharakah mutanaqisah since the value of an asset is based on the market price and
the rental payment is based on the market rental values, these values will change during
the duration of the tenure. However, in BBAthe value of the asset is xed throughout the
maturity term and the value is based on the interest. The prot obtained from
musharakah mutanaqisah also varies since the rental payment change over time, unlike
BBA where the prot obtained by the nancier is xed. By using the BBA concept the
amount to be paid to the nancier is said to be four times the actual cost, this would end
up being a burden to the customers. This showed that musharakah mutanaqisah
concept is a better alternative for nancing than BBA (Ahamed Kameel and
Dzuljastri, 2009).
Maheran (2006) studied and modied the formula obtained from Shaharir (1989).
From this study she was able to produce a formula that can be used for nancing in
musharakah mutanaqisah principle. The model obtained from Shaharir (1989) can
actually be used for mudharabah, but Maheran (2006) introduced a newmodel so that it
can go well with musharakah mutanaqisah principle. There are two prots that will be
obtained by the nancier and the entrepreneur by using the musharakah mutanaqisah
principle which are the prots from their investment and the periodic payment.
There are three comparisons that Maheran (2006) used in her studies. The rst 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 nancier obtained from the new model was also lower than the conventional model.
Hence, she concluded that using musharakah mutanaqisah principle and the newmodel
is much more reasonable because the prots obtained fromthe joint venture will benet
both sides.
Mohd. Noor (2008) adapted the model of musharakah mutanaqisah in nancing
introduced by Maheran (2006) into sukuk. He compared the amount of prots obtained
from sukuk investment in musharakah mutanaqisah and BBA and found that
musharakah mutanaqisah gave higher prot. He also concluded that this model is more
benecial to investors and issuers rather than BBA where it only beneted one party.
Mawarliza (2009) compared the amount of prots obtained fromsukuk investment in
ijarah and musharakah mutanaqisah principles. In her study she used the musharakah
mutanaqisah model that was introduced by Maheran (2006) in nancing 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 prot was calculated by taking the difference from the proceeds at future value and
the proceeds at present value. She discovered that the amount of prots gained from
musharakah mutanaqisah model using coupon rate of 4.5 per cent, price at par and
tenure of ve years was greater than using ijarah principle where the price is at a
discount.
It would be interesting to see whether the ndings of Mawarliza (2009) still hold
for sukuk with long-term tenure, both principles using prices at par, and a 3.5 per cent
Sukuk
investment
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coupon rate. The goal of this research is to compute and compare the prots 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. 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
Commission Malaysia, 2009). The computation of the prots obtained fromijarah sukuk
investment will be computed according to the amount of prot available in the data.
2. Methodology
In this paper two models were used to calculate prot. These models are based on
ijarah and musharakah mutanaqisah principles.
2.1 Ijarah principle used in sukuk
2.1.1 Structure of ijarah principle used in sukuk. A trustee (SPV) acting on behalf of the
investors will purchase a leasable asset from the issuer. The trustee will lease the asset
back to the issuer based 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 specic 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) (Figure 1).
2.1.2 Formula for ijarah principle used in sukuk. Based on the ijarah sukuk data
obtained from RHB headquarters, Kuala Lumpur, the amount of periodic rental
payments due to investors is computed by using the simple interest formula. The
formula for simple interest, I obtained from Kya and Kiang (1996) is as follows:
I Pr t 1
where:
I simple interest.
P principal amount.
r rate of simple interest.
t time (in years).
In order to calculate the accumulated prot earned by investors at the end of tenure, the
future value of an annuity formula will be used to compute the future value of the
rental payments at maturity. In this research we assumed that the prots obtained at
each prot dates are reinvested in a different investment scheme with different prot
rate. The formula to compute the future value of an annuity S is obtained from Kya and
Kiang (1996) as follows:
S R
1 i
n
21
i

2
Figure 1.
The structure of ijarah
principle used in sukuk
(1) Sells asset and pays rent (2) Issues bond and pays rent
(4) Buys asset back (3) Releases bond
Issuer SPV
Investor
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where:
S future value of annuity at the end of n interest periods.
n number of rental payments.
i interest rate per interest period.
R periodic payments.
2.2 Musharakah mutanaqisah principle
2.2.1 Structure of musharakah mutanaqisah principle used in nance. 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.
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 benet from the joint venture but the issuers will
also receive monthly payment based on the prot sharing ratio (Figure 2).
2.2.2 Formula for musharakah mutanaqisah principle. This model was introduced
by Maheran (2006) for Islamic nancing and adapted in Islamic bonds by Mohd.
Noor (2008).
To obtain prots for investors using this model, several formulas will be used:
(1) The amount of periodic payment, B to investors is:
B
P
0
k1 r
t
21 P
0
t1 2k k1 r
t
21=r
3
where t is the number of periods.
(2) Semi-annual prot for investors, C
t
at the end of the tth period:
C
t
rk P
0
1 r
t21
2B
1 r
t21
r
21

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Figure 2.
The structure of
musharakah mutanaqisah
principle
(3) Release bond and receive principal and profit
(3) Fully paid principal and profit and own asset
(2) Issues bond and pay and receive periodic payment
(2) Buys bond and receive periodic payment
(1) Provide capital (1) provide capital
Issuer Investor
Joint venture
(asset)
Sukuk
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(3) Accumulated prot for investors, U
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at the end of tth period:
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1 r
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1 r
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5
where:
P
0
face value.
k prot sharing ratio.
r prot rate on a single semi-annual payment.
3. Implementation
3.1 Ijarah principle used in sukuk
Some important information on the 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
Commission Malaysia, 2009) are indicated in Table I. According to the information
available in the data, the prot was distributed twice a year where the dates were
already determined which were at 30 April and 31 October of every year from the
issuance date until the maturity date. The price issued was at par and the prot rate
was 3.5 per cent:
.
To calculate the rental payment earned by investors using equation (1):
P RM10; 000; 000:00 r 3:5% t 15
I 10; 000; 0000:03515 RM5; 250; 000
Since the bank will pay the prot twice a year until the maturity date, the
payment that will be obtained by investors at each prot date is computed below:
p
5; 250; 000
15
RM350; 000=year
q
350; 000
2
RM175; 000=period
In order to compute the future value, we used the periodic rental payment, q as
calculated above and substituted it in R, in equation (2). The interest rate used in
this formula was obtained from RHB Banking Group (2010) web site under
Amount Tenure (years)
RM115,000,000.00 19
RM35,000,000.00 17.5
RM10,000,000.00 15
RM5,000,000.00 12.5
Source: RHB Kuala Lumpur
Table I.
Data description of ijarah
sukuk issued by Projek
Lintasan Shah Alam
Sdn. Bhd
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money market rates where the negotiable instrument deposit rate is 2.25 per cent
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
package compared to all other rates that have lots of different packages to choose
from. We also assumed the prots 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):
n 30 i
2:25%
2
1:125% R RM175; 000
S 175; 000
1 0:01125
30
21
0:01125

RM6; 203; 576:35
The accumulated prot at the end of 15 years per unit of sukuk is:
S
6; 203; 576:35
100; 000
RM62:04
In this section, the computation of rental payment and accumulated prot earned by
investors are only for the tenure of 15 years. The computation of rental payment and
accumulated prot earned by investors for all other tenures is available in Appendix 1.
3.2 Musharakah mutanaqisah principle
This principle is still not being used in the sukuk market in Malaysia. In this research,
the formulas were introduced by Maheran (2006) in nancing and adapted in sukuk by
Mohd. Noor (2008).
For this principle, a few assumptions were made such as the price was at par, the
tenure was for 12.5, 15, 17.5 and 19 years, prot rate was at 3.5 per cent, the initial
investment and prot sharing ratio was 80:20 where 80 per cent was for investors and
20 per cent was for issuers and the investors will hold the sukuk until the maturity date:
.
To calculate the amount of periodic payment to investors using equation (3):
P
0
RM100 k 0:8 r 3:5% t 30
B
1000:81 0:035
30
21 100
301 20:8 0:81 0:035
30
21=0:035

244:5434964
47:29814182
RM5:1703
This amount is constant throughout the tenure of 15 years. The payment
consists of the prot earned by investors and the cost of buying back the asset
from the investors.
.
To calculate the semi-annual prot for investors using equation (4) for t 1:
P
0
RM100 k 0:8 r 3:5% t 1
Sukuk
investment
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A
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2
:
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2
0

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1
4

(
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C
1
0:0350:8 1001 0:035
0
25:170255891
1 0:035
1
21
0:035
21

0:028100 RM2:8
This formula will also be used to calculate the semi-annual prot for investors
until the 30th period.
.
To calculate the accumulated prot for investors using equation (5) for t 1:
P
0
RM100 k 0:8 r 3:5% t 1
U
1
0:8 1001 0:035
1
21 25:170255891
1 0:035
1
21
0:035
21

0:028100 RM2:8
This formula will also be used to compute the accumulated prot for investors
until the 30th period.
In this section, the calculations of prot and accumulated prot for musharakah
mutanaqisah sukuk are shown for the tenure of 15 years at the end of the rst period
only. The detailed computations of other components needed in the computation of
prot under the same principle for the rst period are available in Appendix 3. A more
comprehensive result for the computation of the prots for all tenures is available in
Appendix 4.
4. Results and discussion
The results for the computation of prots obtained from investment in sukuk ijarah
and musharakah mutanaqisah principles were tabulated using Microsoft Excel.
4.1 Ijarah principle used in sukuk
The amount of prot obtained is calculated based on equation (2) using different
tenures which are 12.5, 15, 17.5 and 19 years and the amount presented above is the
total amount based on the total number of sukuk sold. As we can see in Table II, the
prot obtained by investors between 15 and 17.5 years increases by over RM20 million.
The result obtained also suggested that between 17.5 and 19 years the prot increases
by over RM68 million.
4.2 Musharakah Mutanaqisah principle
The periodic payment and accumulated prot obtained by investors were calculated
based on equations (3) and (5), respectively. This result was obtained based on the price
Tenure Prot
25 2,509,936.55
30 6,203,576.35
35 26,098,322.92
38 94,768,817.17
Table II.
Accumulated prot using
ijarah principle for
different tenures
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at par, with 3.5 per cent prot rate and tenure of 12.5, 15, 17.5 and 19 years so that it
coincides with the result obtained from using ijarah principle. The prot sharing ratio
used for this principle is 80:20 for investors and issuers, respectively. The accumulated
prot obtained by investors indicated that the difference of the prots between the three
earlier tenures is constant at RM11 since the gap of the tenure remains the same which is
2.5 years. However, the accumulated prot obtained between 17.5 and 19 years the
difference is only RM7 since the gap of the tenure is only 1.5 years (Table III).
Table IV indicates the amount of accumulated prots per unit of sukuk invested in
ijarah and musyarakah mutanaqisah principles for tenures of 12.5, 15, 17.5 and 19 years.
FromTable IVwe can see that the prot obtained by investors using ijarah principle
for long-term tenure is higher compared to using musharakah mutanaqisah principle.
Figure 3 shows the comparison of accumulated prot as indicated in Table IV.
The graph in Figure 3 showed that as the year increases the accumulated prot
obtained by investors will also increase. We can also see that as the tenure gets longer
the difference between the prots 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 ve
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 prot for sukuk
ijarah is higher than musharakah mutanaqisah.
5. Conclusion and recommendations
The objective of this research was to compute and compare the prots 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. From Table IV,
it suggested that using ijarah principle with long-term tenure is a better investment
alternative than using musharakah mutanaqisah principle. As shown in Figure 3, the
accumulated prot earned by investors for long-term tenure will keep on increasing
Tenure Periodic payment Accumulated prot for investors
25 5.7815 44.5383
30 5.1703 55.1077
35 4.7513 66.2941
38 4.5603 73.2929
Table III.
Accumulated prot using
musharakah
mutanaqisah principle for
different tenures
Tenure Ijarah principle Musharakah mutanaqisah principle Prot difference
25 50.20 44.54 5.66
30 62.04 55.11 6.93
35 74.55 66.29 8.26
38 82.41 73.29 9.12
Table IV.
Accumulated prot for
investors using ijarah
and musharakah
mutanaqisah principles
Sukuk
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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 obtainedinthis researchwill create awareness andprovide
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 inwhere comparisoncanbe done andtryto ndthe formulas for that particular
principle that are being used in the sukuk market. Besides that, other researchers canalso
take into consideration the economic factors that can inuence 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 nancing 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
Figure 3.
Graph of accumulated
prot for ijarah and
musharakah mutanaqisah
principle
90.00
R
M
85.00
80.00
75.00
70.00
65.00
60.00
55.00
50.00
45.00
40.00
12.5 17.5 19 years 15
Ijarah Principle Musharakah
Mutanaqisah
Principle
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A
t

2
2
:
3
7

2
0

S
e
p
t
e
m
b
e
r

2
0
1
4

(
P
T
)
Ayub, M. (2007), Securitization, Sukuk, and Fund Management Potential to be Realized by Islamic
Financial Institutions, available at: http://islamiccenter.kaau.edu.sa/7iecon/Ahdath/
Con06/_pdf/Vol2/48MuhammadAyubSecuritization,Sukuk.pdf
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
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.
Maheran, M.J. (2006), Model matematik pelaburan musyarakah dan mutanaqisah, doctoral thesis,
Universiti Kebangsaan Malaysia, Bangi.
Mawarliza, M.Z. (2009), Comparison of the prot 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 nancial 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 ABrief 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):
P RM5; 000; 000:00 r 3:5% t 12:5
I 5; 000; 0000:03512:5 RM2; 187; 500
Sukuk
investment
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p
2; 187; 500
12:5
RM175; 000=year
q
175; 000
2
RM87; 500
.
To calculate the future value of annuity earned by investors using equation (2):
n 25 i
2:25%
2
1:125% R RM87; 500
S 87; 500
1 0:01125
25
21
0:01125

RM2; 509; 936:55
The accumulated prot at the end of 12.5 years per unit of sukuk is:
S
2; 509; 936:55
50; 000
RM50:20
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):
P RM35; 000; 000:00 r 3:5% t 17:5
I 35; 000; 0000:03517:5 RM21; 437; 500
p
21; 437; 500
17:5
RM1; 225; 000=year
q
1; 225; 000
2
RM612; 500
.
To calculate the future value of annuity earned by investors using equation (2):
n 35 i
2:25%
2
1:125%R RM612; 500
S 612; 500
1 0:01125
35
21
0:01125

RM26; 093; 822:92
The accumulated prot at the end of 17.5 years per unit of sukuk is:
S
26; 093; 822:92
350; 000
RM74:55
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):
P RM115; 000; 000:00 r 3:5% t 19
I 115; 000; 0000:03519 RM76; 475; 000
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p
76; 475; 000
19
RM4; 025; 000=year
q
4; 025; 000
2
RM2; 012; 500
.
To calculate the future value of annuity earned by investors using equation (2):
n 38 i
2:25%
2
1:125% R RM2; 012; 500
S 2; 012; 500
1 0:01125
38
21
0:01125

RM94; 768; 817:18
The accumulated prot at the end of 19 years per unit of sukuk is:
S
94; 768; 817:18
1; 150; 000
RM82:41
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 r
t21
A1
.
The amount of issuers investment at the end of the tth period:
Q
t
Q
0
1 r
t21
A2
.
The amount of semi-annual investment payment at the end of the tth period:
W
t
B
1 r
t21
21
r

A3
.
The amount of semi-annual prot for issuers at the end of the tth period:
D
t
r1 2k P
0
1 r
t21
2B
1 r
t21
21
r

A4
.
The amount of accumulated prot for issuers at the end of tth period:
M
t
1 2k P
0
1 r
t21
21 2B
1 r
t21
21
r
2t

A5
.
The amount of semi-annual principal at the end of tth period:
S
t
B 2C
t
A6
.
The balance of issuers equity at the end of t payment period:
Q
t
Q
0
tB 2P
0
k1 r
t
21 Bk
1 r
t
21
r
2t

A7
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2
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(
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.
The balance of investors equity at the end of t payment period:
E
t
P
0
k1 r
t
21 1 2tB Bk
1 r
t
21
r
2t

A8
Appendix 3
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
H
1
1201 0:035
121
RM120
.
To calculate the amount of issuers investment using equation (A2):
Q
0
RM20:00 t 1 r 0:035
Q
1
201 0:035
121
RM20
.
To calculate the amount of semi-annual investment payment using equation (A3):
B 5:170255891 t 1 r 0:035
W
1
5:170255891
1 0:035
121
21
0:035

RM0
.
To calculate the amount of semi-annual prot for issuers using equation (A4):
B 5:170255891 t 1 r 0:035 P
0
100 k 0:8
D
1
0:0351 20:8 1001 0:035
121
25:170255891
1 0:035
121
21
0:035

RM0:7
.
To calculate the amount of accumulated prot for issuers using equation (A5):
B 5:170255891 t 1 r 0:035 P
0
100 k 0:8
M
1
1 20:8 1001 0:035
121
21 25:170255891
1 0:035
121
21
0:035
21

RM0:7
.
To calculate the amount of semi-annual principal using equation (A6):
B 5:170255891 C
1
2:8
S
1
5:170255891 22:8 RM2:3703
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2
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4

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.
To calculate the balance of issuers equity using equation (A7):
Q
0
20 B 5:170255891 t 1 r 0:035 P
0
100 k 0:8
Q
1
20 15:170255891 21000:81 0:035
1
21
5:1702558910:8
1 0:035
1
21
0:035
21

RM22:3703
.
To calculate the balance of investors equity using equation (A8):
Q
0
20 B 5:170255891 t 1 r 0:035 P
0
100 k 0:8
E
1
1000:81 0:035
1
21 1 215:170255891
5:1702558910:8
1 0:035
1
21
0:035
21

RM97:6297
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.
Payment no. t
Periodic
payment, B Prot rate, r
Total
investment,
H
t
Issuer
investment,
Q
t
Investment
payment,
W
t
0 0 20 0
1 5.7815 0.035 120 20 0
2 5.7815 0.035 124.2 20.7 5.7815
3 5.7815 0.035 128.547 21.425 11.7654
4 5.7815 0.035 133.046 22.174 17.9587
5 5.7815 0.035 137.703 22.950 24.3688
6 5.7815 0.035 142.522 23.754 31.0033
7 5.7815 0.035 147.511 24.585 37.8699
8 5.7815 0.035 152.674 25.446 44.9769
9 5.7815 0.035 158.017 26.336 52.3326
10 5.7815 0.035 163.548 27.258 59.9458
11 5.7815 0.035 169.272 28.212 67.8254
12 5.7815 0.035 175.196 29.199 75.9809
13 5.7815 0.035 181.328 30.221 84.4217
14 5.7815 0.035 187.675 31.279 93.1580
15 5.7815 0.035 194.243 32.374 102.2001
16 5.7815 0.035 201.042 33.507 111.5586
17 5.7815 0.035 208.078 34.680 121.2447
18 5.7815 0.035 215.361 35.894 131.2698
19 5.7815 0.035 222.899 37.150 141.6458
20 5.7815 0.035 230.700 38.450 152.3849
21 5.7815 0.035 238.775 39.796 163.4999
22 5.7815 0.035 247.132 41.189 175.0040
23 5.7815 0.035 255.781 42.630 186.9106
24 5.7815 0.035 264.734 44.122 199.2340
25 5.7815 0.035 273.999 45.667 211.9888
(continued) Table AI.
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Semi-annual
prot for
investors, C
t
Accumulated
prot for
investors, U
t
Semi-annual
prot for
issuers, D
t
Accumulated
prot for
issuers, M
t
Semi-
annual
principal,
S
t
Balance
issuer
equity, Q
t
Balance
investors
equity, E
t
0 0 0 0 0 20 100
2.8 2.8 0.7 0.7 2.9815 22.9815 97.0185
2.7361 5.5361 0.6840 1.3840 3.0454 26.0270 93.9730
2.6700 8.2061 0.6675 2.0515 3.1115 29.1385 90.8615
2.6016 10.8077 0.6504 2.7019 3.1800 32.3185 87.6815
2.5307 13.3384 0.6327 3.3346 3.2508 35.5693 84.4307
2.4574 15.7958 0.6144 3.9490 3.3241 38.8934 81.1066
2.3816 18.1774 0.5954 4.5444 3.4000 42.2933 77.7067
2.3030 20.4804 0.5758 5.1201 3.4785 45.7718 74.2282
2.2218 22.7022 0.5554 5.6755 3.5598 49.3316 70.6684
2.1376 24.8398 0.5344 6.2100 3.6439 52.9755 67.0245
2.0506 26.8904 0.5126 6.7226 3.7310 56.7065 63.2935
1.9605 28.8508 0.4901 7.2127 3.8211 60.5276 59.4724
1.8672 30.7180 0.4668 7.6795 3.9144 64.4419 55.5581
1.7707 32.4887 0.4427 8.1222 4.0109 68.4528 51.5472
1.6707 34.1594 0.4177 8.5399 4.1108 72.5636 47.4364
1.5673 35.7267 0.3918 8.9317 4.2142 76.7778 43.2222
1.4603 37.1871 0.3651 9.2968 4.3212 81.0990 38.9010
1.3495 38.5366 0.3374 9.6341 4.4320 85.5310 34.4690
1.2349 39.7715 0.3087 9.9429 4.5466 90.0777 29.9223
1.1162 40.8877 0.2791 10.2219 4.6653 94.7430 25.2570
0.9934 41.8811 0.2484 10.4703 4.7881 99.5311 20.4689
0.8663 42.7474 0.2166 10.6869 4.9152 104.4463 15.5537
0.7347 43.4821 0.1837 10.8705 5.0468 109.4931 10.5069
0.5986 44.0807 0.1496 11.0202 5.1830 114.6761 5.3239
0.4576 44.5383 0.1144 11.1346 5.3239 120 0
Table AI.
Payment no. t
Periodic
payment, B Prot rate, r
Total
investment,
H
t
Issuer
investment,
Q
t
Investment
payment,
W
t
0 0 0 120 20 0
1 5.1703 0.035 120 20 0
2 5.1703 0.035 124.2 20.7 5.1703
3 5.1703 0.035 128.547 21.425 10.5215
4 5.1703 0.035 133.046 22.174 16.0600
5 5.1703 0.035 137.703 22.950 21.7923
6 5.1703 0.035 142.522 23.754 27.7253
7 5.1703 0.035 147.511 24.585 33.8660
8 5.1703 0.035 152.674 25.446 40.2215
9 5.1703 0.035 158.017 26.336 46.7995
10 5.1703 0.035 163.548 27.258 53.6078
11 5.1703 0.035 169.272 28.212 60.6543
12 5.1703 0.035 175.196 29.199 67.9475
13 5.1703 0.035 181.328 30.221 75.4959
(continued)
Table AII.
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n
l
o
a
d
e
d

b
y

U
N
I
V
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R
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T
I

M
A
L
A
Y
S
I
A

S
A
B
A
H

A
t

2
2
:
3
7

2
0

S
e
p
t
e
m
b
e
r

2
0
1
4

(
P
T
)
14 5.1703 0.035 187.675 31.279 83.3085
15 5.1703 0.035 194.243 32.374 91.3945
16 5.1703 0.035 201.042 33.507 99.7636
17 5.1703 0.035 208.078 34.680 108.4256
18 5.1703 0.035 215.361 35.894 117.3907
19 5.1703 0.035 222.899 37.150 126.6697
20 5.1703 0.035 230.700 38.450 136.2734
21 5.1703 0.035 238.775 39.796 146.2132
22 5.1703 0.035 247.132 41.189 156.5009
23 5.1703 0.035 255.781 42.630 167.1487
24 5.1703 0.035 264.734 44.122 178.1692
25 5.1703 0.035 273.999 45.667 189.5753
26 5.1703 0.035 283.589 47.265 201.3807
27 5.1703 0.035 293.515 48.919 213.5993
28 5.1703 0.035 303.788 50.631 226.2455
29 5.1703 0.035 314.421 52.403 239.3344
30 5.1703 0.035 325.425 54.238 252.8813
Semi-annual
prot for
investors, C
t
Accumulated
prot for
investors, U
t
Semi-annual
prot for
issuers, D
t
Accumulated
prot for
issuers, M
t
Semi-
annual
principal,
S
t
Balance
issuer
equity, Q
t
Balance
investors
equity, E
t
0 0 0 0 0 20 100
2.8 2.8 0.7 0.7 2.3703 22.3703 97.6297
2.7532 5.5532 0.6883 1.3883 2.4170 24.7873 95.2127
2.7048 8.2581 0.6762 2.0645 2.4654 27.2527 92.7473
2.6547 10.9128 0.6637 2.7282 2.5155 29.7682 90.2318
2.6029 13.5157 0.6507 3.3789 2.5674 32.3356 87.6644
2.5492 16.0649 0.6373 4.0162 2.6210 34.9567 85.0433
2.4937 18.5586 0.6234 4.6396 2.6766 37.6332 82.3668
2.4362 20.9947 0.6090 5.2487 2.7341 40.3673 79.6327
2.3767 23.3714 0.5942 5.8429 2.7936 43.1609 76.8391
2.3151 25.6865 0.5788 6.4216 2.8552 46.0161 73.9839
2.2514 27.9379 0.5628 6.9845 2.9189 48.9350 71.0650
2.1854 30.1232 0.5463 7.5308 2.9849 51.9198 68.0802
2.1171 32.2404 0.5293 8.0601 3.0531 54.9730 65.0270
2.0464 34.2868 0.5116 8.5717 3.1238 58.0968 61.9032
1.9733 36.2601 0.4933 9.0650 3.1970 61.2937 58.7063
1.8976 38.1577 0.4744 9.5394 3.2727 64.5664 55.4336
1.8192 39.9769 0.4548 9.9942 3.3510 67.9174 52.0826
1.7382 41.7151 0.4345 10.4288 3.4321 71.3495 48.6505
1.6542 43.3693 0.4136 10.8423 3.5160 74.8656 45.1344
1.5673 44.9367 0.3918 11.2342 3.6029 78.4685 41.5315
1.4774 46.4141 0.3694 11.6035 3.6928 82.1613 37.8387
1.3844 47.7985 0.3461 11.9496 3.7859 85.9472 34.0528
1.2881 49.0865 0.3220 12.2716 3.8822 89.8293 30.1707
1.1884 50.2749 0.2971 12.5687 3.9819 93.8112 26.1888
1.0852 51.3601 0.2713 12.8400 4.0850 97.8963 22.1037
0.9784 52.3386 0.2446 13.0846 4.1918 102.0881 17.9119
0.8679 53.2065 0.2170 13.3016 4.3024 106.3904 13.6096
0.7535 53.9600 0.1884 13.4900 4.4167 110.8072 9.1928
0.6351 54.5951 0.1588 13.6488 4.5351 115.3423 4.6577
0.5126 55.1077 0.1281 13.7769 4.6577 120 0
Table AII.
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Musharakah mutanaqisah principle tenure of 17.5 years using formulas mentioned in
methodology and Appendix 2 is shown in Table AIII.
Musharakah mutanaqisah principle tenure of 19 years using formulas mentioned in
methodology and Appendix 2 is shown in Table AIV.
Payment no. t
Periodic
payment, B Prot rate, r
Total
investment,
H
t
Issuer
investment,
Q
t
Investment
payment,
W
t
0 0 0 120 20 0
1 4.7513 0.035 120 20 0
2 4.7513 0.035 124.2 20.7 4.75
3 4.7513 0.035 128.55 21.42 9.67
4 4.7513 0.035 133.05 22.17 14.76
5 4.7513 0.035 137.70 22.95 20.03
6 4.7513 0.035 142.52 23.75 25.48
7 4.7513 0.035 147.51 24.59 31.12
8 4.7513 0.035 152.67 25.45 36.96
9 4.7513 0.035 158.02 26.34 43.01
10 4.7513 0.035 163.55 27.26 49.26
11 4.7513 0.035 169.27 28.21 55.74
12 4.7513 0.035 175.20 29.20 62.44
13 4.7513 0.035 181.33 30.22 69.38
14 4.7513 0.035 187.67 31.28 76.56
15 4.7513 0.035 194.24 32.37 83.99
16 4.7513 0.035 201.04 33.51 91.68
17 4.7513 0.035 208.08 34.68 99.64
18 4.7513 0.035 215.36 35.89 107.88
19 4.7513 0.035 222.90 37.15 116.40
20 4.7513 0.035 230.70 38.45 125.23
21 4.7513 0.035 238.77 39.80 134.36
22 4.7513 0.035 247.13 41.19 143.82
23 4.7513 0.035 255.78 42.63 153.60
24 4.7513 0.035 264.73 44.12 163.73
25 4.7513 0.035 274.00 45.67 174.21
26 4.7513 0.035 283.59 47.26 185.06
27 4.7513 0.035 293.52 48.92 196.29
28 4.7513 0.035 303.79 50.63 207.91
29 4.7513 0.035 314.42 52.40 219.94
30 4.7513 0.035 325.43 54.24 232.39
31 4.7513 0.035 336.82 56.14 245.27
32 4.7513 0.035 348.60 58.10 258.61
33 4.7513 0.035 360.80 60.13 272.41
34 4.7513 0.035 373.43 62.24 286.70
35 4.7513 0.035 386.50 64.42 301.48
Semi-annual
prot for
investors, C
t
Accumulated
prot for
investors, U
t
Semi-annual
prot for
issuers, D
t
Accumulated
prot for
issuers, M
t
Semi-
annual
principal,
S
t
Balance
issuer
equity, Q
t
Balance
investors
equity, E
t
0 0 0 0 0 20 100
2.8 2.8 0.7 0.7 1.9513 21.95 98.0487
2.7650 5.5650 0.6912 1.3912 1.9863 23.94 96.0624
(continued) Table AIII.
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Y
S
I
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A
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H

A
t

2
2
:
3
7

2
0

S
e
p
t
e
m
b
e
r

2
0
1
4

(
P
T
)
2.7287 8.2937 0.6822 2.0734 2.0226 25.96 94.0399
2.6912 10.9848 0.6728 2.7462 2.0601 28.02 91.9798
2.6523 13.6372 0.6631 3.4093 2.0989 30.12 89.8809
2.6121 16.2493 0.6530 4.0623 2.1391 32.26 87.7417
2.5705 18.8198 0.6426 4.7050 2.1807 34.44 85.5610
2.5274 21.3473 0.6319 5.3368 2.2238 36.66 83.3372
2.4829 23.8301 0.6207 5.9575 2.2684 38.93 81.0688
2.4367 26.2669 0.6092 6.5667 2.3145 41.25 78.7543
2.3890 28.6559 0.5972 7.1640 2.3623 43.61 76.3920
2.3396 30.9954 0.5849 7.7489 2.4117 46.02 73.9803
2.2884 33.2838 0.5721 8.3210 2.4628 48.48 71.5175
2.2355 35.5193 0.5589 8.8798 2.5158 51.00 69.0017
2.1807 37.7000 0.5452 9.4250 2.5706 53.57 66.4311
2.1240 39.8240 0.5310 9.9560 2.6273 56.20 63.8038
2.0653 41.8892 0.5163 10.4723 2.6860 58.88 61.1178
2.0045 43.8938 0.5011 10.9734 2.7467 61.63 58.3711
1.9416 45.8354 0.4854 11.4589 2.8096 64.44 55.5615
1.8766 47.7120 0.4691 11.9280 2.8747 67.31 52.6868
1.8092 49.5212 0.4523 12.3803 2.9420 70.26 49.7447
1.7395 51.2607 0.4349 12.8152 3.0118 73.27 46.7330
1.6673 52.9280 0.4168 13.2320 3.0839 76.35 43.6491
1.5927 54.5207 0.3982 13.6302 3.1586 79.51 40.4905
1.5154 56.0361 0.3788 14.0090 3.2359 82.75 37.2546
1.4354 57.4715 0.3588 14.3679 3.3159 86.06 33.9387
1.3526 58.8241 0.3381 14.7060 3.3987 89.46 30.5401
1.2669 60.0909 0.3167 15.0227 3.4844 92.94 27.0557
1.1782 61.2691 0.2945 15.3173 3.5731 96.52 23.4826
1.0864 62.3555 0.2716 15.5889 3.6649 100.18 20
0.9914 63.3469 0.2478 15.8367 3.7599 103.94 16
0.8930 64.2400 0.2233 16.0600 3.8582 107.80 12
0.7913 65.0312 0.1978 16.2578 3.9600 111.76 8
0.6859 65.7172 0.1715 16.4293 4.0653 115.83 4
0.5769 66.2941 0.1442 16.5735 4.1744 120.00 0
Table AIII.
Payment no. t
Periodic
payment, B Prot rate, r
Total
investment,
H
t
Issuer
investment,
Q
t
Investment
payment,
W
t
0 0 0 120 20 0
1 4.5603 0.035 120 20 0
2 4.5603 0.035 124.2 20.7 4.5603
3 4.5603 0.035 128.547 21.425 9.2803
4 4.5603 0.035 133.046 22.174 14.1654
5 4.5603 0.035 137.703 22.950 19.2216
6 4.5603 0.035 142.522 23.754 24.4547
7 4.5603 0.035 147.511 24.585 29.8709
8 4.5603 0.035 152.674 25.446 35.4767
9 4.5603 0.035 158.017 26.336 41.2788
10 4.5603 0.035 163.548 27.258 47.2839
11 4.5603 0.035 169.272 28.212 53.4991
12 4.5603 0.035 175.196 29.199 59.9319
(continued)
Table AIV.
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A
H

A
t

2
2
:
3
7

2
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m
b
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(
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13 4.5603 0.035 181.328 30.221 66.5899
14 4.5603 0.035 187.675 31.279 73.4809
15 4.5603 0.035 194.243 32.374 80.6131
16 4.5603 0.035 201.042 33.507 87.9949
17 4.5603 0.035 208.078 34.680 95.6350
18 4.5603 0.035 215.361 35.894 103.5426
19 4.5603 0.035 222.899 37.150 111.7269
20 4.5603 0.035 230.700 38.450 120.1977
21 4.5603 0.035 238.775 39.796 128.9649
22 4.5603 0.035 247.132 41.189 138.0391
23 4.5603 0.035 255.781 42.630 147.4308
24 4.5603 0.035 264.734 44.122 157.1512
25 4.5603 0.035 273.999 45.667 167.2118
26 4.5603 0.035 283.589 47.265 177.6246
27 4.5603 0.035 293.515 48.919 188.4018
28 4.5603 0.035 303.788 50.631 199.5562
29 4.5603 0.035 314.421 52.403 211.1010
30 4.5603 0.035 325.425 54.238 223.0498
31 4.5603 0.035 336.815 56.136 235.4169
32 4.5603 0.035 348.604 58.101 248.2169
33 4.5603 0.035 360.805 60.134 261.4648
34 4.5603 0.035 373.433 62.239 275.1764
35 4.5603 0.035 386.503 64.417 289.3679
36 4.5603 0.035 400.031 66.672 304.0561
37 4.5603 0.035 414.032 69.005 319.2584
38 4.5603 0.035 428.523 71.421 334.9928
Semi-annual
prot for
investors, C
t
Accumulated
prot for
investors, U
t
Semi-annual
prot for
issuers, D
t
Accumulated
prot for
issuers, M
t
Semi-
annual
principal,
S
t
Balance
issuer
equity, Q
t
Balance
investors
equity, E
t
0 0 0 0 0 20 100
2.8 2.8 0.7 0.7 1.7603 21.7603 98.2397
2.7703 5.5703 0.6926 1.3926 1.7900 23.5504 96.4496
2.7396 8.3099 0.6849 2.0775 1.8208 25.3711 94.6289
2.7078 11.0177 0.6769 2.7544 1.8526 27.2237 92.7763
2.6749 13.6925 0.6687 3.4231 1.8855 29.1092 90.8908
2.6408 16.3333 0.6602 4.0833 1.9195 31.0287 88.9713
2.6055 18.9389 0.6514 4.7347 1.9548 32.9835 87.0165
2.5690 21.5079 0.6423 5.3770 1.9913 34.9748 85.0252
2.5313 24.0391 0.6328 6.0098 2.0291 37.0039 82.9961
2.4922 26.5313 0.6230 6.6328 2.0682 39.0721 80.9279
2.4517 28.9830 0.6129 7.2458 2.1086 41.1807 78.8193
2.4098 31.3928 0.6025 7.8482 2.1505 43.3312 76.6688
2.3665 33.7593 0.5916 8.4398 2.1939 45.5251 74.4749
2.3216 36.0809 0.5804 9.0202 2.2387 47.7638 72.2362
2.2752 38.3561 0.5688 9.5890 2.2852 50.0490 69.9510
2.2271 40.5832 0.5568 10.1458 2.3332 52.3822 67.6178
2.1774 42.7606 0.5443 10.6901 2.3830 54.7652 65.2348
2.1259 44.8865 0.5315 11.2216 2.4344 57.1996 62.8004
2.0726 46.9591 0.5182 11.7398 2.4877 59.6873 60.3127
2.0175 48.9766 0.5044 12.2441 2.5429 62.2302 57.7698
1.9604 50.9370 0.4901 12.7342 2.5999 64.8302 55.1698
1.9013 52.8383 0.4753 13.2096 2.6590 67.4892 52.5108
(continued)
Table AIV.
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2
2
:
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7

2
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(
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About the authors
Mariam Jamilah Abdul Jalil graduated from Universiti Teknologi MARA, Malaysia with a
Bachelors Degree in Mathematics and has since worked with the largest bank in Malaysia. Her
research and knowledge in Islamic nance has assisted her in her career advancement and she
will be proceeding to pursue a Masters in Science (Mathematics) overseas. Mariam Jamilah
Abdul Jalil is the corresponding author and can be contacted at: mariam.j@maybank.com.my
Zuriah Abdul Rahman is a Professor in Islamic Insurance/Insurance and Risk Management
and currently serving as the Director of Arshad Ayub Graduate Business School, Universiti
Teknologi MARA, Malaysia.
1.8402 54.6785 0.4600 13.6696 2.7202 70.2094 49.7906
1.7769 56.4553 0.4442 14.1138 2.7835 72.9928 47.0072
1.7114 58.1667 0.4278 14.5417 2.8490 75.8418 44.1582
1.6436 59.8103 0.4109 14.9526 2.9167 78.7585 41.2415
1.5734 61.3838 0.3934 15.3459 2.9869 81.7454 38.2546
1.5008 62.8846 0.3752 15.7211 3.0595 84.8049 35.1951
1.4257 64.3102 0.3564 16.0776 3.1347 87.9396 32.0604
1.3479 65.6581 0.3370 16.4145 3.2125 91.1521 29
1.2673 66.9254 0.3168 16.7314 3.2930 94.4451 26
1.1840 68.1095 0.2960 17.0274 3.3763 97.8214 22
1.0978 69.2072 0.2744 17.3018 3.4626 101.2840 19
1.0085 70.2157 0.2521 17.5539 3.5518 104.8358 15
0.9161 71.1318 0.2290 17.7830 3.6442 108.4800 12
0.8205 71.9523 0.2051 17.9881 3.7399 112.2199 8
0.7215 72.6738 0.1804 18.1685 3.8388 116.0587 4
0.6191 73.2929 0.1548 18.3232 3.9413 120 0 Table AIV.
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