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Market Rent Value as a Basis for Profit Margin Calculation in Home Financings Based on Diminishing Musharakah with Ijarah: Possibilities for Implementation in Bosnia and Herzegovina

  • Anisa Lojo-BajrićEmail author
  • Fikret Hadžić
Chapter
  • 8 Downloads

Abstract

Musharakah is one of the most used Islamic financing models because of the flexibility it provides for both banks and clients and transparency in terms of profit and loss sharing. Most Islamic banks calculate profit margin for diminishing musharakah financings using different external and internal criteria, such as risk premium, costs of sources, client’s rating, and competition margins. Profit margin is often linked to different referent indices, like LIBOR, as financings based on diminishing musharakah are usually long-term financings. Profit margin could also be calculated using a market rent as a base, since the revenue bank receives from a client is actually rent for its share in real estate bought through diminishing musharakah financing. In this paper, we shall analyze possibilities to use market rent as a base for profit margin in Bosna Bank International Sarajevo (BBI), the only bank in Bosnia and Herzegovina that operates according to Shariah principles.

Keywords

Diminishing musharakah Profit margin Bosna Bank International Sarajevo Market rent 

References

Journal Articles

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Corporate Documents

  1. Bosna Bank International. 2015. Odluka o profitnim maržama za finansiranja i stopama prinosa na depozite BBI dd Sarajevo (Decision on Profit margins for Financings and Profit Rates on Deposits of BBI Sarajevo).Google Scholar
  2. Bosna Bank International. 2016a. Akcija Tarifa i uslovi finansiranja BBI – fizička lica, Verzija 1.1 (Tariff and Conditions of Financings for Natural Persons, Version 1.1).Google Scholar
  3. Bosna Bank International. 2016b. Tarifa i uslovi finansiranja BBI – fizička lica, Verzija 1.2 (Tariff and Conditions of Financings for Natural Persons, Version 1.2).Google Scholar
  4. Bosna Bank International. 2017a. Akcija finansiranja BBI – fizička lica, Verzija 1.0 (Tariff of BBI Financings for Natural Persons, Version 1.0).Google Scholar
  5. Bosna Bank International. 2017b. Akcija Tarifa i uslovi finansiranja BBI – fizička lica, Verzija 1.1 (Tariff of BBI Financings for Natural Persons, Version 1.1).Google Scholar
  6. Bosna Bank International. 2017c. Pravilnik o profitnim maržama za finansiranje i stopama prinosa na depozite BBI dd Sarajevo (Rulebook on Profit Margins for Financings and Profit Rates on Deposits of BBI Sarajevo).Google Scholar

Copyright information

© The Author(s) 2020

Authors and Affiliations

  1. 1.Bosna Bank International SarajevoSarajevoBosnia and Herzegovina
  2. 2.School of Economics and Business in SarajevoUniversity of SarajevoSarajevoBosnia and Herzegovina

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