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A REPORT ON CONSUMER FINANCING

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A REPORT ON CONSUMER FINANCING

GROUP MEMEBERS

NAME ROLL NO

IRFAN SAEED---------------------------------------------35

RASHID RIAZ---------------------------------------------70

RIAZ-UL-HASSAN------------------------------------------71

QADEER AHMED--------------------------------------------69

SAIFUR REHMAN-------------------------------------------75

SYED OBAID HUSSAIN--------------------------------------93

SUBMITTED TO

SIR FASEEH
(COURSE INSTRUCTOR)

DATE OF SUBMISSION-----------------------------------------------------------------------12TH MAY, 2008

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A REPORT ON CONSUMER FINANCING

SPECIAL THANKS

This report is prepared by the cooperation of various professionals of banks. They guide us about
consumer financing. They also tell us some practical facts about consumer financing which helped us
to improve our learning.

We have visited different banks but the response was not positive. But the SONERI, NBP, FAYSAL
& ALBARAKA ISLAMIC BANK gives us positive response.

We are thankful to MR SHAKEEL AHMED (SONERI BANK) & M TAHA SHAMIM


(ALBARAKA ISLAMIC BANK) for providing us valuable information.

In the end we are also thankful to SIR FASEEH (COURSE INSTRUCTOR), because he guide us in
preparing this report which increase our practical understanding about consumer financing.

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A REPORT ON CONSUMER FINANCING

TABLE OF CONTENTS

S.NO PARTICULARS PAGE NO

1 EXCUTIVE SUMMARY 5

2 SONERI BANK CAR FINANCE 7

3 SONERI BANK HOME FINANCE 10

4 ALBARAK ISLAMIC BANK CAR FINANCE 14

5 ALBARAK ISLAMIC BANK HOME FINANCE 16

6 NATIONAL BANK OF PAKISTAN EDUCATION LOAN 19

7 MOTOR CYCLE LOAN 22

ALBARAKA ISLAMIC BANK & FAYSAL BANK CAR FINANCE


8 COMPARISON 23

ALBARAKA ISLAMIC BANK & SONERI BANK HOME FINANCE


9 COMPARISON 26

10 COMMENTS ON COMPARISON 28

EXECUTIVE SUMMARY

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A REPORT ON CONSUMER FINANCING

Banking sector is growing very rapidly in Pakistan. Both conventional & Islamic banks are offering
different products for consumer. So it is necessary to have the knowledge that how a person can avail
different loans offered by the banks.

Keeping it in view we prepared this report which include that who can avail the loan & what is the
method of repaying the loan. This report consists of primary information which one should know
before applying for banks loans.

In this report we have also compare consumer financing of different banks, which are very helpful to
identify that which bank is giving loans in lowest cost.

Islamic banking is growing day by day. So keeping this trend in mind we have also give details of
products of Islamic bank. Further more we have also compare the products of Islamic banks with the
conventional banks.

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INTRODUCTION OF SONERI BANK

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Incorporated on September 28, 1991 the first Branch of Soneri Bank Limited formally opened doors
for operations in Lahore on April 16, 1992 followed by Karachi Branch on May 09,1992. The bank
now operates with 89 branches spread all over Pakistan including the Northern Areas of the country
where no other private bank has ventured so far. Expansion of branches is based on a policy of
maintaining a balance between the urban and rural areas with a view to offering services even in the
remote areas of Pakistan. Pleasant and sophisticated atmosphere has been provided in the branches
which are all fully air-conditioned and computerized.

The essence of our business philosophy is to cater to the banking requirements of small & medium
sized entrepreneurs, providing them qualitative & competitive services with emphasis on encouraging
exports. Nearly forty percent of our credit portfolio is related to export financing and credit decisions
are taken within 48 hours.

SONERI CAR FINANCE

ELIGIBLE BORROWERS

Salaried persons, self employed professionals & business persons who meet our other conditions to
qualify for the finance.

PURPOSE OF FINANCE

For purchase of brand new un-registered cars / other types of approved motor vehicles for private use.

MAXIMUM AMOUNT OF FINANCE

For Cars upto 1800 CC Rs. 1.0 M


For Cars exceeding 1800 CC Rs. 2.0 M

DOWN PAYMENT

On finance of upto Rs. 1.0 M : Minimum 15% of Car Price.

On finance exceeding Rs. 1.0 M


but not more than Rs. 2.0 M : Minimum 20% of Car Price.

MARK-UP RATE (ANNUALISED)

14% p.a. calculated on daily products of outstanding finance amount.

REPAYMENT PERIOD

Principle amount of Finance plus mark-up thereon is repayable within maximum period of 5 years.

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PROCESSING FEE

Rs. 2000/- per application recoverable up-front (Refundable if finance not approved).

INSURANCE OF CARS / MOTOR VEHICLES

Cars / Motor Vehicles financed to be comprehensively insured with any of the Insurance Companies
listed on the approved panel of the Bank. Insurance Premium payable by the borrowers up-front for
each year during the repayment period.

PRE-PAYMENT PENALTY

2% on outstanding principal amount of finance being pre-paid.

LATE PAYMENT CHARGES

Service Charges of Rs. 500/- per overdue Installment. The overdue installments shall be reflected in
borrower's current account with the lending branch.

OTHER CHARGES

Car / Motor Vehicle Registration Charges, Car / Vehicle Registration Renewal Fee and Stamp Duty on
Loan Documents executed at actual and costs involved with repossession of cars / motor vehicles are
for the account of borrowers.

REPOSSESSION OF CARS / MOTOR VEHICLES.

The Bank reserves the Right to repossess Cars / Motor Vehicles financed at any time if monthly
repayment installments fall overdue and sell the repossessed Cars / Motor Vehicles in the open market
towards adjustment of amount due from the borrowers.

AGE LIMIT

Minimum 21 years of age at the start of financing and maximum 60 years at the time of maturity. For
all the customers who apply for car finance.

.DEBT SERVICE RATION (DSR)

Monthly installment maximum limit is 40% of monthly salary or income of the customer

VERIFICATION OF SOURCE OF INCOME

The income shows by the customers who are applying for car finance is checked by the banks through
their agencies. If the customer is a salaried person then his two year continuous permanent

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A REPORT ON CONSUMER FINANCING

employment record is checked. If the customer is engaged in any profession then his profession
valuation is done on the basis of tax return

DOCUMENTATION REQUIREMENT

Copy of N.I.C Latest paid bill (utility, mobile phone, credit card)

Two photographs Valid driving license

Salary certificate NTN certificate

Latest six months bank statement Complete filled application form

Other legal documents to be signed will be provided by the bank.

.OWNERSHIP OF CAR & SECURITY

The car finance is a hire purchase agreement between the customer & bank. The car is in the joint
name of bank & customer (joint ownership) until customer pays the entire outstanding amount to the
bank. The car is itself security. If customer fails to pay the monthly installment & declared default then
bank repossessed the car.

CIB REPORT

Credit information bearue (cib) is the report which is issued by the state bank of Pakistan. This report
includes all the details of the loans which are availed by the customers through out Pakistan from all
banks. This report also shows that who take loans from which banks, how much loan they have repaid.
If customer is default & does not repaid his loans to any bank, then he is not given any other financing
facilities.

APPROVAL OF CAR FINANCE

If car finance amount is up to 1M then branch approve it. If car finance amount is above 1M then head
office approved it.

SONERI HOME FINACE

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Soneri Ghar Finance is the most affordable route to a home of your own. Offering a maximum finance
of Rs. 5 million and a convenient repayment period of up to 10 years, Soneri Bank is the best way to
find the home of your choice".

PURPOSE:
Purchase / Construction of residential Property for self-occupancy.
Extension / Renovation on own property.

FINANCING AMOUNT:
Purchase / Construction of residential property up to Rs. 5,000,000/-
Extension / Renovation on own property up to Rs. 2,000,000/-

PAYMENT PERIOD:
Purchase / Construction of residential Property up to 10 years.
Extension / Renovation on own property up to 7 years.

MARK-UP RATES:
Floating Mark-up rate @ 4.5%
above Prevailing SBP Discount Rate. Minimum 14% per annum.

FEE, LEGAL CHARGES, VALUATIONS:


Processing fee: Rs. 2500/- or 0.50% of the finance amount whichever is higher.
Legal/valuations charges Rs. 3000/-.

ELIGIBILITY:
Confirmed Permanent Employee/ Self Employed Professionals / Business person.
Minimum length of confirmed service with present employer must be at least for 5 years.
Minimum length of practice by Self Employed Professionals / Business person must be at least for 2
years.
Applicant’s age must not be more than 60 years at the time of maturity of the finance being applied
for.
Monthly repayment installments not to exceed 40% of the net take home salary / 40% of declared
monthly income.
Should have no over due track record from any bank in Pakistan
Life insurance cover for the loan amount.

CONSTRUCTION ON PLOT

Bank provide loan for construction on those plots which are leased.

DEBT SERVICE RATION (DSR)

Monthly installment maximum limit is 40% of monthly salary or income of the customer.

SCHEDULE OF CONSTRUCTION

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Customer gives the entire schedule of construction to the Soneri bank. So that the Soneri bank made
arrangement for funds to the supplier or dealer from which the construction material is purchased. In
this situation bank directly deal with the supplier of construction material & bank does not include the
customer in all this matter.

CUSTOMER LIFE INSURANCE

The life insurance of customer is required who avail home finance from Soneri bank. All insurance
expenses are paid by the customer to the insurance company which is on the bank panel. Customer is
bound to pay insurance until he does not repay all the financed amount of the Soneri bank. On death of
customer bank recovers its amount from insurance company.

APPROVAL OF HOME FINANCE

All cases of home finance are approved by the head office.

BILL OF QUANTITY

Bill of quantity is demanded by the bank to make the payment to suppliers

SECURITY

The documents of the property are in the hands of the Soneri bank. If customers do not repay the loan
then bank has the right to sale out the property in order to recover its amount.

DOCUMENTATION REQUIREMENT

Copy of N.I.C

Two photographs

Salary certificate

Latest six months bank statement

Latest paid bill (utility, mobile phone, credit card)

Bill of quantities issued by a licensed architect

Copy of title deed, approved building plan, NOC certificate from DHA, KDA, LDA

Complete filled application form

Other legal documents to be signed will be provided by the bank.

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INTRODUCTION OF ALBARKA ISLAMIC BANK

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OUR VISION

To be a leading and a diversified International Islamic Bank, Offering a wide range of Quality
Products and Services and Forming strategic alliances for a Competitive Edge.

THE MISSION STATEMENT

We strive to be a Premier Regional Islamic Bank, Dedicated to the Economic and Social Development
of our target market, Maximising our Clients and Shareholders Value And focusing on the Human
Resource Development In an environment of Creativity and Innovation.

BREIF BACKGROUND

AlBaraka Islamic Bank (AIB) has the honor of being the pioneer of Islamic banking in Pakistan and
has been operating in the country as branches of AlBaraka Islamic Bank Bahrain since 1991. Over
the years, the bank has successfully developed and maintained its identity as one of the leading
providers of a host of banking products and services in strict compliance with Shari’ah principles.

Currently operating with 18 branches in 10 major cities of the country, AIB offers a wide array of
Islamic financing products such as Murabaha, Ijara, Musharaka and Islamic Export Refinance,
catering to a diverse cross-section of the economy, including the Corporate, SME and Consumer
sectors. Moreover, various Shari’ah compliant deposit schemes are available for customers to invest
their funds in, along with a variety of other ancillary services such as online banking, ATM/debit card,
safe deposit lockers and utility bill payments etc.

AlBaraka Islamic Bank is a member of AlBaraka Banking Group (ABG) which is a Bahraini Joint
Stock Company listed on Bahrain and Dubai stock exchanges and one of the well-known leading
international Islamic banks. ABG is the biggest Islamic banking group listed on the Bahrain Stock
Exchange in terms of capitalization

ALBARKA BANK CAR FINANCE

SILENT FEATURES

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Maximum amount Rs. 1,000,000

Swift approval within 2-3 days

Strict compliance to Islamic Sharia'h

3 year and 5 year term Ijara at competitive rates

PRODUCT HIGHLIGHTS

Available against any brand new unregistered car

Car to be registered in the name of the bank

Client to be provided with authenticated duplicate registration of the car and duplicate key, along
with an authorization certificate from AIB permitting the client to drive the vehicle

Spouse, children or parents can be co-applicants, subject to the age criteria

The facility has an early adjustment option in which asset can be purchased by making payments at the
pre determined amount given in the undertaking to purchase the leased asset

Provisional rental schedule to be provided to the customer at the time of booking of the asset and the
payment will be made on the basis of this schedule. Any revision in the payment schedule during the
intervening period from the date of booking to the date of delivery will result in the adjustment to the
rental schedule.

FEE & PAYMENTS

10% of the value of the car to be provided as security deposit

Payments through equal monthly rental to the Bank in the form of post dated cheques

One time processing and documentation charges Rs. 3,000

ELIGIBILITY

All Pakistani nationals holding computerized NIC. Old NIC acceptable against evidence of having
applied for new

Minimum 21 years of age at the start of financing and maximum 60 years at the time of maturity
Salaried, Business or Self-employed

SECURITY, GUARANTEE & OWNERSHIP

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Security deposits are minimum 15% of car value which are deposited in advance by customers to the
bank. This amount is used to payoff the bank loan. The car which is issued on loan basis is registered
on the name of the AlBaraka Islamic bank. The car is itself security. If customer fails to pay the
monthly installment & declared default then bank repossessed the car.

INSURANCE (TAKAFUL)

Insurance is paid by the customers to the insurance companies which are on the panel of the bank. Pak
qattar takaful company & pak takaful company are the Islamic insurance companies which are on the
bank panel. The customer pays the insurance on monthly basis to the insurance companies through
bank till maturity of the loan.

DEBT SERVICE RATION (DSR)

Monthly installment maximum limit is 40% of monthly salary or income of the customer.

VERIFICATION OF SOURCE OF INCOME

The income shows by the customers who are applying for car finance is checked by the banks through
their agencies. If the customer is a salaried person then his two year continuous permanent
employment record is checked. If the customer is engaged in any profession then his profession
valuation is done on the basis of tax return.

DOCUMENTATION REQUIREMENT

Copy of N.I.C

Two photographs

Salary certificate

Latest six months bank statement

Latest paid bill (utility, mobile phone, credit card)

Valid driving license

NTN certificate

Complete filled application form

Other legal documents to be signed will be provided by the bank.

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ALBARKA BANK HOME FINANCE

Your dream, your peace of mind, a house or Maskan of your own, is now a reality with AlBaraka's
'Maskan' home finance scheme on the Shariah compliant concept of Diminishing Musharaka.

WE RESPOND TO YOUR NEEDS

Purchase of House / Flat

Construction of House

Purchase of Plot & Construction

Renovation of House / Flat

Asset Transfer Facility

ELIGIBILITY

Minimum age 25, Maximum 60 years (at the time of maturity of Musharaka)

Available for salaried and self-employed

Minimum income* as low as Rs. 20,000 per month (for salary person)

WHY ALBARAKA'S MASKAN?

Strictly Shariah Compliant

Minimum processing charges

Quick approval process

Up to 80% of Bank's participation

Low rental rates

Fixed and floating rate options

Repayment tenure from 3-to 20 years

Financing up to Rs. 20,000,000

Bank shares in Insurance and property tax

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Co-applicant option

DOCUMENTATION REQUIREMENT

Copy of N.I.C

Two photographs

Salary certificate

Latest six months bank statement

Latest paid bill (utility, mobile phone, credit card)

Bill of quantities issued by a licensed architect

Copy of title deed, approved building plan, NOC certificate from DHA, KDA, LDA

Complete filled application form

Other legal documents to be signed will be provided by the bank.

SECURITY

The property or building is on the name of Albaraka bank. So if customer do not repay the monthly
rental then the bank terminate the agreement.

BILL OF QUANTITY & PAYMENT

Bill of quantity is demanded by the bank to make the payment to suppliers. The disbursements is made
in four stages.

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NATIONAL BANK OF PAKISTAN

NBP maintains its position as Pakistan's premier bank determined to set higher standards of
achievements. It is the major business partner for the Government of Pakistan with special emphasis
on fostering Pakistan's economic growth through aggressive and balanced lending policies,
technologically oriented products and services offered through its large network of branches locally,
internationally and representative offices.

NATIONAL BANK OF PAKISTAN EDUCATION LOAN

Pursuant to announcement made by the federal finance minister in his 2001-02 budget speech, a
student loan scheme (SLS) for education has been launched by government of Pakistan in
collaboration with major commercial banks of Pakistan (NBP, HBL, UBL, MCB, ABL). Under the
scheme, financial assistance will be provided by way of interest free loans to the meritorious students
who have financial constraints for pursuing their studies in scientific, technical & professional
education with in Pakistan.

FINANCIAL ASSISTANCE COMMITTEE FOR EDUCATION LOAN

The scheme will be administered by a high powered committee comprising of deputy governor state
bank of Pakistan, president of commercial banks & deputy secretary, ministry of finance.

OBJECTIVE OF SLS

The objective of sls is to provide financial assistance to meritorious students of insufficient means who
have obtained 70% marks in last public examination & are unable to pursue their studies within
Pakistan due to financial difficulties.

DOCUMENTATION REQUIREMENTS

Photocopies of fee challan raised/demanded by the educational institution

Income certificate of parents or guardian form employer

Income certificate of parents or guardian form area counselor of union council if self employed

Copy of domicile

Copy of C.N.I.C

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Copy of SSC certificate

Copy of HSSC

Copy of DEGREE(S)

Copy of marks sheet

An unstamped self addressed envelop.

An original certificate from vice chancellor/ principal/registrar of concerned university letter head
confirming date of admission & completion date of study.

NOTE all photocopies must be attested

ELIGIBILITY

Under the sls student is eligible to apply for loan provided

He/she has obtained admission on merit in approved universities & colleges of public sector.

He/she obtained 70% marks in last public exam

Age limit of students is

DEGREE AGE
Graduation Not exceeding 20 years
Post graduation Not exceeding 30 years
Ph. D Not exceeding 35 years

SCHEDULE FEE

Schedule fee is the fee which is paid to the institute by NBP on behalf of student. This fee is directly
paid to the institute.

UNSCHEDULED FEE

This fee includes the personal expense of student like text book expense, hostel expense. This fee is
directly disbursed to the student.

DURATION OF LOAN FACILITY

The loan facility is available for entire duration of study.

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REPAYMENT

The maximum period of repayment of loan is 10 years from date of disbursement of 1 st installment.
The borrower shall repay loan in monthly installment after six months from date of 1st employment or
one year from the date of completion of studies, whichever is earlier.

MARKUP RATE

This education loan is free of interest. The only principal amount is repaid by the student to bank.

INSTITUTE ON PANEL OF NBP

All the government institute & universities are on NBP panel. Only the students of these universities
are eligible for this loan.

DOMICILE OF STUDENT APPLYING FOR LOAN

Students from all over Pakistan including FATA & AZAD KASHMIR.

AK AUTOS MOTOR CYCLE FINACE

DOCUMENTATION REQUIREMENT

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Copy of C.N.I.C
Stamp paper agreement
Other legal documents will be provided by the dealer.

REFERENCE

Reference of two persons is required. They can be shopkeeper or neighbor of the person who is taking
motorcycle on installment. These two persons are responsible of repayment of loan.

HPA

Hire purchase agreement is done between the dealer & person who are getting motorcycle on
installment basis. Means both parties are co owner of motorcycle.

SECURITY

Motor cycle is itself security. If customer does not pay installments then dealer can repossess the
motorcycle & may sale out it in order to recover it amount.
In case customer does not make payment then dealer is authorized to take payment from the two
persons who give the guarantee on customer behalf.

LUM SUM CASH PAYMENT

The lum sum cash value of star 70cc motorcycle is Rs 46,000.

VALUE AT INSTALLMENT BASIS


On installment basis the price of the motorcycle is Rs 58,000.

DOWN PAYMENT
Down payment is Rs 10,000 which include insurance & registration charges.

DURATION OF LOAN
The duration of loan is 2 years.

Total amount Rs 58,000


Down payment Rs 10,000
Monthly installment Rs 2,000
No of installment Rs 24
Amount of interest Rs 12,000
% of interest for 2 years 26.08 %

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ALBARAK ISLAMIC BANK CAR FINANCING

VEHICLE MEHRAN VX CNG


VALUE OF VEHICLE RS 377,000
IRR KIBOR +3 %( 13%)

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PROCESSING FEE RS 3000


SECURITY DEPOSIT 20%
SECURITY DEPOSIT RS 75400
1ST YEAR TAKAFUL(INSURANCE) RS 15080
DOWN PAYMENT RS 93480
1ST YEAR MONTHLY RENTAL RS 7992 ( 12 MONTHS EQUAL RENTALS)
2ND YEAR MONTHLY RENTAL RS 7867 ( 12 MONTHS EQUAL RENTALS)
3RD YEAR MONTHLY RENTAL RS 7741 ( 12 MONTHS EQUAL RENTALS)
4TH YEAR MONTHLY RENTAL RS 7615 ( 12 MONTHS EQUAL RENTALS)
5TH YEAR MONTHLY RENTAL RS 6861 ( 12 MONTHS EQUAL RENTALS)
TOTAL COST RS 550404
TENURE 5 YEARS

DOWN PAYMENT = PROCESSING FEE+SECURITY DEPOSITS+1ST YEAR INSURANCE

BANK PROFIT=550404-15080*5-377000-3000 = RS 95004

% OF BANK PROFIT = 95004/377000 =25.2%

FAYSAL BANK CAR FINANCING

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VEHICLE MEHRAN VXR CNG


VALUE OF VEHICLE RS 424000
EQUAL MONTHLY INSTALLMENT (60 INST.) RS 8247 MONTHLY FOR 5 YEARS
DOCUMENTS CHARGES RS 5000
SECURITY DEPOSIT 20%
SECURITY DEPOSIT RS 84800
1ST YEAR INSURANCE(ADVANCE) RS 21200
DOWN PAYMENT RS 111000

2ND YEAR MONTHLY INSURANCE RS 1590 (12 MONTHS EQUAL INSURANCE)


3RD YEAR MONTHLY INSURANCE RS 1502 (12 MONTHS EQUAL INSURANCE)
4TH YEAR MONTHLY INSURANCE RS 1413 (12 MONTHS EQUAL INSURANCE)
5TH YEAR MONTHLY INSURANCE RS 1325 (12 MONTHS EQUAL INSURANCE)
TOTAL COST RS 675780
TENURE 5 YEARS

DOWN PAYMENT = DOCUMENT CHARGES+ SECURITY DEPOSITS+1ST YEAR INSURANCE

BANK PROFIT = 8247*5*12 – 424000 + 84800 = RS 155620

% OF BANK PROFIT = 155620/424000 = 36.70%

COMMENTS

THE PROFIT OF FAYSAL BANK IS 11.5 %( RS 60,616) IS HIGHER THAN ALBARAK BANK
CAR FINANCING. SO THE FAYSAL BANK CAR FINANCING IS EXPENSIVE.

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ALBARAK ISLAMIC BANK HOME FINANCING

PROPERTY VALUE RS 1,000,000


CUSTOMER SHARE (20%) RS 200000

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A REPORT ON CONSUMER FINANCING

ALBARAK BANK SHARE (80%) RS 800000


PROFIT RATE 14%
TENOR 120 MONTHS (10 YEARS)
PAYMENT MONTHLY
MONTHLY INSTALLMENT RS 12421 (120 INSTALLMENTS)

BANK PROFIT = 10*12*12421 – 800000 = RS 690520

% OF BANK PROFIT = 690520/800000 = 86.31%

SONERI BANK HOME FINANCING

PROPERTY VALUE RS 1,000,000


CUSTOMER SHARE (20%) RS 200000
ALBARAK BANK SHARE (80%) RS 800000
INTEREST RATE 14%

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TENOR 120 MONTHS (10 YEARS)


PAYMENT MONTHLY
MONTHLY INSTALLMENT RS 12960 (120 INSTALLMENTS)

BANK PROFIT = 12960*12*10 - 800000 = RS 755200

% OF BANK PROFIT = 755200/800000 = 94.4%

COMMENTS

THE PROFIT OF SONERI BANK IS 8.09% (RS 64680) IS HIGHER THAN ALBARAKA BANK
HOME FINANCING. SO THE SONERI BANK HOME FINANCING IS EXPENSIVE.

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