Arabian J Bus Manag Review (Kuwait Chapter) An Open Access Journal

DOI: 10.12816/0037799 Vol. 6 (9), 2017

Arabian Journal of Business and

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The Application of Rule 78 in Vehicle Financing by Islamic Banks in Malaysia

Omaima Eltahir Babikir Mohamed
Assistant Professor, Bank Rakyat School of Business and Entrepreneurship (BRSBE)
Universiti Tun Abdul Razak (UNIRAZAK)
Corresponding Email: [email protected]
Mohd Yaziz Mohd Isa
Assistant Professor, Bank Rakyat School of Business and Entrepreneurship (BRSBE)
Universiti Tun Abdul Razak (UNIRAZAK)

Article History:
Received: 04-April-2017, Accepted: 25-May -2017

Abstract

Al-Ijarah Thumma al-Bay' (AITAB) is an innovative product designed to vehicle financing. Since
its inception, AITAB has been a popular product due to the heightened demand by customers.
Although AITAB is popular, it is not without condemn especially on the issue of using Rule 78,
which is similar to conventional Hire-Purchase practise. This paper, attempts to address the issue
of using Rule 78 which affects the customers in the case of default. A case study is used to compare
the use of Rule 78 and simple profit rate methods on repaying the principal amount and the profit
rate by the customer. The discussion is based upon the case on vehicle financing for three years
and the impact on the defaulter on the thirteenth month of financing. The result shows the customer
pays higher amount in the case of default using the Rule 78 in financing compared to simple profit
rate method.

Keywords: Islamic Banking, Hire-Purchase, Vehicle Financing, AITAB, Rule 78, Simple Profit
Rate.

Introduction

The evolution of Islamic banking and finance as a modern corporate entity for the past few years has brought the banking
industry into several new perspectives. Since its emergence in Malaysia 1983, various products have been introduced
and schemed to meet consumer’s demands corresponding to the Shari’ah laws. Despite many Shari’ah compliant
products being offered, ijarah financing has faced quite a debatable issue on the practice of AITAB with the spirit of
Shari’ah as established in the Islamic banking theory. Even though AITAB facility was established more than twenty
years ago in Islamic banking, there is no Islamic hire-purchase act to regulate this product. As a consequence, there is a
discrepancy on the fairness of AITAB operations. This paper is an attempt to address the issue of the application of Rule
78 on default customers. The case study is used to compare different methods of financing with and without the use of
Rule 78 and the application of AITAB in Malaysia.

The remainder of this paper is organised as follows: In Section (2) a review of the literature of AITAB, concept and
mechanism of AITAB and mechanism repayment & overview of AITAB development in Malaysia. Section (3) covers
the methodology employed, while the 4th section presented covers the findings and discussion. The recommendations
& conclusion are present in Section (6).

Literature Review

Since 1995, AITAB became a demanding product provided by the Islamic banks in Malaysia. Bank Islam (Malaysia)
Berhad is the first Islamic bank in Malaysia that has implemented AITAB in 1995 (Abdullah & Dusuki, 2004). AITAB
became a popular and demanded product as an alternative to conventional Hire-Purchase since its first inception in last
three decades. Despite being one of the most popular products of the Islamic banks, AITAB is being criticised by many

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researchers due to its lacking in explicit Shari’ah regulatory framework (El-Din and Abdullah, 2007). Fault-finders
argue that AITAB is simply a copy of the conventional hire-purchase instrument as it is mainly based on the conventional
Hire-Purchase Act 1967.

Many Islamic scholars consider AITAB as a conventional product rather than an Islamic product influenced by many
non-Shari’ah-compliant factors. El-Din and Abdullah (2007) reveal that the practice of AITAB in Malaysia does not
seem to be 100% Shari’ah-compliant because it involves several issues like Shari’ah framework, ownership, transfer of
ownership, maintenance responsibility, insurance responsibility, deposit payment, penalty in case of default, and legal
treatment. Abdullah and Dusuki (2004) also documented many issues that question the validity of AITAB transaction,
for instance intention and lack of understanding of parties, signing of two separate documents in sequence. Sale and
Ijarah contracts are the most desirable contracts and 100% Shari’ah compliant. However, both contracts do not fully
comply with Islamic principles in its real-life applications (Azma, Rahman & Albaity, 2014). The flaring effects
regarding AITAB implementation has prompted Islamic scholars to re-think about the mechanism of its current
operations to make it more acceptable among users. More research is clearly needed to explore all the existing issues
concerning AITAB financing. This paper therefore, focuses on the issue of the use of Rule 78 and its implication in the
case of customer defaults. This paper explores the prospects of AITAB in Malaysia and provides recommendation for
further improvement of the AITAB implementation.

Concept and Mechanism of AITAB

According to al-Zuhayli (2002), AITAB refers to owning the benefit of certain assets for a specific period of time, by
paying an agreed sum of rental, with an agreement that the owner will transfer the rented asset to the hirer at the end of
the agreed period or during the period, provided all rental payments or instalments have been made in sum. The transfer
of ownership is affected by a new and independent contract, either by giving the asset as a gift, or selling it at an agreed
price. Abdullah (2005) asserts that this arrangement comprises an ijarah contract which is then followed by contract of
sale, thus, each contract is independent and not combined in one agreement. In a commercial context, AITAB in
Malaysia is used as the mode of financing adopted by Islamic banks and other financial institutions offering Islamic
products. It is a contract under which the bank finances an asset such as equipment, building or other facilities for the
customer against an agreed rental together with an undertaking from the customer to make additional payments in an
account which will eventually enable the customer to purchase the said asset. The rental and the purchase price are fixed
so that the bank gets back its principal sum along with some profit which is usually determined in advance (Al-Omar
and Abdel- Haq 1996). AITAB contracts, have to fulfil all conditions of a valid contract stipulated by the Shari’ah laws.
The contract should be executed by mutual agreement, responsibilities and benefits of both parties that should be clearly
spelt out, the agreement should be for a known period and against a known price (Ahmad 1994), AITAB contract has
to abide to principles of Ijarah and sale contract with respect to the conditions imposed onto the contracting parties, offer
and acceptance, consideration and subject matter of the contract.

The mechanism of AITAB practice in Malaysia is as follows:

A customer request for vehicle financing of RM 50,000, Islamic bank rate of profit is 5% for duration of 5 years. The
monthly instalment for AITAB Financing uses the following formula:

Total Amount Payable = Financing Amount + (Financing Amount x Profit Rate x financing Period)

Total Amount Payable = (RM50, 000) + (RM50, 000 x 5.00% x 5 years/60 months)

= RM50, 000 + RM 12,500)

= RM62, 000

Monthly Instalment = RM62, 500/60

= RM1, 041.67

Notes: AITAB duration varies between 1 year to 9 years depending on the type of vehicle and customer’s eligibility.

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Overview of AITAB Development in Malaysia

The operation of AITAB has undergone several phases. Bank Islam (Malaysia) Berhad was the first bank that initiated
AITAB facility. The bank then sets up a consultant to assist other banks and finance companies to operate such Islamic
financing schemes and thus expanded AITAB operation to finance companies and cooperative societies. Accordingly,
AITAB facility has been very well practised to the extent that the government has also adopted the concept in their
dealings. The hire-purchase business in Malaysia has a unique governance structure. There are a few government
agencies and ministries involved in overseeing and regulating the practice. The most significant role is played by the
Ministry of Domestic Trade and Consumerism which has exclusive jurisdiction over hire-purchase businesses. Any
substantial issue should be referred to this ministry.

Besides, the Finance Ministry holds a power to grant licenses to finance companies that wish to offer AITAB. Since
motor vehicles are the most demanded goods under AITAB financing, the transaction will certainly involve the Ministry
of Transportation which handles the approval of vehicle’s grant and license. Nevertheless, its popularity and wide
acceptance amongst the general public, government and banking industry players, AITAB is still facing problems
particularly with regards to its inadequacy of Shari’ah regulatory framework to govern its practice. Until now, there is
no specific law enacted to support AITAB operation. As a result, the AITAB operation is still referring to conventional
Hire-Purchase Act 1967. This poses concerns amongst practitioners especially those who highly observe Shari’ah
compliant issues due to the inherent limitations of Hire-Purchase Act to address certain Shari’ah issues.

Consequently, there is an attempt by the government of Malaysia to study the possibility of introducing a specific law
for AITAB. However, the idea so far has yet to come to fruition. Even the enactment of IFSA 2013 has not touched on
AITAB. Until today there are fifteen (15) banks in Malaysia offering the AITAB facility1 for individual and corporate
customers. Table 1 depicts the list of Malaysian Financial Institutions that offer AITAB.
Table 1: List of Malaysian Islamic Banks which offer AITAB
No. Name

1. Affin Islamic Bank Berhad

2. Al Rajhi Banking & Investment Corporation (Malaysia) Berhad

3. Alliance Islamic Bank Berhad
4. AmBank Islamic Berhad

5. Bank Islam (Malaysia) Berhad

6. Bank Muamalat (Malaysia) Berhad

7. CIMB Islamic Bank Berhad

8. HSBC Amanah (Malaysia) Berhad

9. Hong Leong Islamic Bank Berhad

10. Kuwait Finance House (Malaysia) Berhad

11. Maybank Islamic Berhad

12. OCBC Al-Amin Bank Berhad

13. Public Islamic Bank Berhad

14. RHB Islamic Bank Berhad

15. Standard Chartered Saadiq Berhad

Source: BNM website (http://www.bnm.gov.my/?ch=li&cat=islamic&type=IB&lang=en

1
https://ringgitplus.com/en/car-loan/

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In the year 1994, there were many Islamic products that have been created including ijarah/leasing, ijarah has been
further developed into Islamic hire-purchase as AITAB and has been accepted as a mode of financing. In Malaysia, the
Islamic hire-purchase uses the term of AITAB. Herwan and Hawari, (2011) assert the implementation of AITAB has
received criticism regarding its validity in 1985. According to them some Islamic scholars have raised questions
regarding the purchase price of the leased assets as it is not a real price because it already takes into account the value
of the assets and the market condition. They also claimed that AITAB appears to be similar to a conditional sale in
which the owner has to sell the leased asset to the hirer in any situation. On the contrary, Malaysian Shari’ah scholar
argued that AITAB structure is based on the sale and purchase concept made on mutual consent between the owner and
hirer. However, there is an explanation for the argument as AITAB is strictly aimed to minimise the risk of default for
banks benefit.

Repayment Mechanism

The mechanism of repayment of financing amount based on instalment payment is that the sum that is to be paid monthly
is fixed every month, but the difference appears on the distribution of instalment paid into principal and profit, the
commonly used method is Rule 78 and the other method is the simple profit rate.

The Rule of 78 is a method of allocating the profit charge on a loan across its payment periods. Under the Rule of 78,
periods are weighted by comparing their numerical values to the sum of all the digits of the periods. The name of the
rule came from the sum up of the digits from 1-12 (1+2+3+4+5+6+7+8+9+10+11+12= 78).

Simple profit is the method of calculating the profit charge on a loan. This type of profit usually applies to vehicle
loans. In repayment using Simple profit, the payment first goes towards that month’s profit, and the remainder goes
towards the principal. Each month’s profit is paid in full so it never accrues. If the financing loan is for RM50, 000, with
profit rate 5% for five years. The payable amount for the 60 Month is RM62, 500. Simple profit versus Rule 78 is that
the amount paid is the same for both methods but the profit earns by the bank using Rule 78 is more in the early years
compare to the profit rate.

Using Rule 78 the weights are applied in reverse, applying large weights to early periods. When paying off a loan, the
repayments consist of two parts: the principal and the profit charge. The Rule of 78 weights earlier payments with more
profit than latter ones. If the loan is not terminated or prepaid early, the total profit paid between simple profit and the
Rule of 78 will be equal. However, because the Rule of 78 weights the earlier payments with more profit than a simple
profit method, paying off a loan early will result in the customer to pay more in case of default. This method of allocating
profit was common in loans for consumer goods, such as automobiles. Apparently, this method penalises default
customers.

Methodology

The method employed in this research is case study method, which enables the research to study the phenomena closely.
There are several categories of case study. Yin (1984) defines the case study research method as an empirical inquiry
that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon
and context are not clearly evident; and in which multiple sources of evidence are used. Moreover, Yin (1984) notes
three categories, namely exploratory, descriptive and explanatory case studies. In this research, the explanatory case
study is employed to examine the data closely both at a surface and deeper level in order to explain the repayment
method in AITAB financing.

The method employed in this research is a case study of Mr. Ahmad Hassan Romli who approaches MXN Islamic Bank
in Malaysia to finance a motor vehicle for a duration of three (3) years. Mr. Romli has paid a 30% down-payment to the
car dealer. He requested financing from MXN Islamic Bank for the balance of RM 40, 000.

Discussion and Analysis

Case study of vehicle financing financed through MXN Islamic Malaysian Bank. The bank apply rule 78 to segregate
the monthly instalment into two division principal amount and bank’s profit. The real name of the customer and the
financing bank are disguised for the confidentiality of the information based on the customer’s request.

The focus of the study, mainly on the impact on customers in the case of default. Table 2 shows the details of financing
such as amount, tenure, monthly instalments and total profit earned by the bank from the financing. A note of
clarification the amount to be paid by the customer monthly is standard which is RM1, 224.44, the difference appears

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on the distribution of the instalment, showing the principal amount of financing and the bank’s profit.
Table2: Vehicle Financing Details
Vehicle Financing
Financing Amount F 40,000.00
Profit rate p.a. (%) r 3.4 %
Tenure (years) t 3
Payments p.a. p 12.00
Total Lease Rentals TR 44,080.00
Total Profit F +(Fx(r/100xt) 4,080.00
Monthly Lease Rentals (MLR) TLR/t x p 1,224.44
Total Profit TP=TLR-F 4,080.00
Number of specific period PRm 36

Table 3 depicts the repayment of financing divided into profit and principal return which represents the total payment
of financing. The amount earned each month is distributed into profit earned and the principal amount provided by MXN
Islamic bank data shows if the customer pays until the end of the period of financing there are no changes to the amount
paid by the customer.

The rule of 78 calculates profit based on the early months, banks try to gain more compared to the months toward the
end of the financing period for example in the first month the profit earned as on Table 3 (36/666 * 4080 = RM 220.54)
while on the 36th month the amount of profit returned is only RM6.13. (1/666 * 4080 = RM 6.13) as per Columns (5) &
(6).

Table 3 demonstrates that during the start of financing repayment more profit is earned on Column (5) and less on the
principal repayment column (6). The profit earned decreases on monthly payment and principal repayment is increasing
gradually to the end of the tenure or 36 months.
Table 3: Monthly Instalments division into Profit and principal per month Using Rule 78
(1) (2) (3) (4) (5) (6) (7)
Profit per Principal
Monthly Outstanding
Month per month
Months Months Rule 78 Instalment Principal
(Rule 78), (Rule 78),
, RM (Rule78), RM
RM RM
1 36 0.054054054 1,224.44 220.54 1,003.90 38,996.10
2 35 0.052552553 1,224.44 214.41 1,010.03 37,986.07
3 34 0.051051051 1,224.44 208.29 1,016.16 36,969.91
4 33 0.04954955 1,224.44 202.16 1,022.28 35,947.63
5 32 0.048048048 1,224.44 196.04 1,028.41 34,919.22
6 31 0.046546547 1,224.44 189.91 1,034.53 33,884.68
7 30 0.045045045 1,224.44 183.78 1,040.66 32,844.02
8 29 0.043543544 1,224.44 177.66 1,046.79 31,797.24
9 28 0.042042042 1,224.44 171.53 1,052.91 30,744.32
10 27 0.040540541 1,224.44 165.41 1,059.04 29,685.29
11 26 0.039039039 1,224.44 159.28 1,065.17 28,620.12
12 25 0.037537538 1,224.44 153.15 1,071.29 27,548.83
13 24 0.036036036 1,224.44 147.03 1,077.42 26,471.41
14 23 0.034534535 1,224.44 140.90 1,083.54 25,387.87
. . . . . . .
. . . . . . .
. . . . . . .
35 2 0.003003003 1,224.44 12.25 1,212.19 1,218.32
36 1 0.001501502 1,224.44 6.13 1,218.32 0.00
666 666 1.00 44,080.00 4,080.00 40,000.00 N/A

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Table 4 shows simple profit rate method of repayment to return the financing plus the profit agreed on between the bank
and the customer. There is no difference on the amount paid monthly using the two methods. The amount is divided
equally among the monthly payment with no difference between the first month and the last month of payment. Profit
paid on monthly instalments is fixed RM113.33 along the 36 months. Principal amount to be paid is RM1,111.11 along
the period of financing which is 36 months in total.
Table 4: Monthly Instalments Division into Profit and Principal per Month Using Simple Profit Rate
(1) (2) (3) (4) (5) (6)
Monthly Profit per Principal per Outstanding
Instalment, Month (Simple month (Simple Principal
Months Months RM Profit), RM Profit), RM (SPC), RM
1 36 1,224.44 113.33 1,111.11 38,888.89
2 35 1,224.44 113.33 1,111.11 37,777.78
3 34 1,224.44 113.33 1,111.11 36,666.67
4 33 1,224.44 113.33 1,111.11 35,555.56
5 32 1,224.44 113.33 1,111.11 34,444.44
6 31 1,224.44 113.33 1,111.11 33,333.33
7 30 1,224.44 113.33 1,111.11 32,222.22
8 29 1,224.44 113.33 1,111.11 31,111.11
9 28 1,224.44 113.33 1,111.11 30,000.00
10 27 1,224.44 113.33 1,111.11 28,888.89
11 26 1,224.44 113.33 1,111.11 27,777.78
12 25 1,224.44 113.33 1,111.11 26,666.67
13 24 1,224.44 113.33 1,111.11 25,555.56
14 23 1,224.44 113.33 1,111.11 24,444.44
. . . . . .
. . . . . .
. . . . . .
35 2 1,224.44 113.33 1,111.11 1,111.11
36 1 1,224.44 113.33 1,111.11 0.00
666.00 666.00 44,080.00 4,080.00 40,000.00 N/A

Figures 1 & 2 describe the principal amount and the profit earned for both methods, simple profit rate method shows a
straight line while the second method shows repayment of principal is lower using rule 78 and higher profit is earned in
the early months of repayment.
1,240

1,200

1,160

1,120

1,080

1,040

1,000
5 10 15 20 25 30 35

Principal per month (Simple Profit)

Principlal per month (Rule 78)

Figure 1: Principal Earned using Simple Profit Rate and Rule 78

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240

200

160

120

80

40

0
5 10 15 20 25 30 35

Profit per month (Simple Profit)

Profit per month (Rule 78)

Figure 2: Profit Earned Using Simple Profit Rate and Rule 78

Monthly payment using the two methods shows amount paid monthly is same which is RM 1,224.44 the difference is
highlighted in Tables 5 & 6 which show the profit earned by the bank by the end of 12th Month which is equivalent to
RM 2,242.16 using Rule 78 while the amount earned by the bank using simple profit rate is only RM 1,359.96. The
difference earned by the bank using rule 78 is amounted to RM 882.20 when the customer defaults on the 13th month.
Thus, the customer has to pay an extra amount of RM 882.16 as depicted in Figure 3 compared to the amount to be paid
using simple profit rate.

The outstanding amount of the principal using rule 78 is RM 26,471.41 while the outstanding amount when the simple
profit rate method used is only RM 25,555.56 with the difference of RM 915.85 as presented in Figure 4.

240

200

160

120

80

40

0
5 10 15 20 25 30 35

Profit Earned under Simple Profit

Profit Earned under Rule 78

Figure 3: Profit Earned by Both Methods

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40,000

30,000

20,000

10,000

0
5 10 15 20 25 30 35

Oustanding Principal (Simple Profit)

Outstanding Principal (Rule 78)

Figure 4: No difference on amount paid upon completion of instalments

The fact is there are two scenarios, the first scenario, when the customer completed the instalment payment, the amount
paid is identical using the two methods of repayment methods (rule 78 & simple profit rate) as depicted in Figure 4.
The second scenario when the customer defaults to pay the monthly instalment. The last instalment paid by Mr. Ahmad
Hassan was the 12th month of financing more profits earned by the bank and outstanding is more using rule 78 in a
comparison with simple profit rate. The difference to be paid is RM 915.85 as depicted in Figure 5.
26,600

26,400

26,200

26,000

25,800

25,600

25,400
1

Outs tanding Princ ipal (Simple Profit)

Outs tanding P rinc ipal (Rule 78)

Figure 5: Outstanding of the principal by the 13th Month.

Conclusion and Recommendation

In recent years, there has been an increasing concern over the sustainability of Islamic banking in Malaysia in regard to
the banking practises. Hence, this research aids in filling the important gap to the present literature on issues related to
AITAB financing.

This paper examines the empirical behaviour of Islamic banks providing vehicle financing. The paper uses a case study
of AITAB financing for a duration of three years, when the customers default after having paid the twelfth instalment
he faces financial difficulties as he lost his job and he cannot continue to pay the instalments from the thirteen month
onward. Due to the use of rule 78 in repayment customers has paid RM 882.20 more than he should if the bank uses the
simple profit rate and not rule 78. In the case of complete transaction, the repayment amount is identical for both methods
which is RM 44,080.00 the difference of the amount paid comes in the case of default, customer has to pay more
compare to Simple profit rate method.

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Islamic banks have been built up on two legs, which are the Islamic teaching and profit generation. It is reasonable that
Islamic banks have their shareholders who would like to have returns on investment but not to forgo the Islamic teaching
on exploitation. Thus, using Rule 78 in AITAB model practiced by Malaysian banks is constructed based on Shari’ah
principles and needs to undertake the consideration of just and fair distribution aspects to all related parties without
neglecting the profit factor.

It is also assumed that the goals of Islamic economics are thought to guide the objective of Islamic banking and Finance.
With the actual practise of the Islamic banks in various jurisdictions, there seems to be a widening gap between the two
Islamic disciplines in terms of their objectives and application. The implications of using the simple profit rate instead
of rule 78 following a hire purchase application in the conventional banking sector, the customer would not pay more
than what he has to pay.

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Appendix A

(1) (2) (3) (4) (5) (6) (7)

Months Months Rule 78 Monthly Profit per Principal per Outstanding

Installment, Month (Rule month (Rule 78), Principal
RM 78), RM RM (Rule78), RM

1 36 0.054054054 1,224.44 220.54 1,003.90 38,996.10

2 35 0.052552553 1,224.44 214.41 1,010.03 37,986.07
3 34 0.051051051 1,224.44 208.29 1,016.16 36,969.91
4 33 0.04954955 1,224.44 202.16 1,022.28 35,947.63
5 32 0.048048048 1,224.44 196.04 1,028.41 34,919.22
6 31 0.046546547 1,224.44 189.91 1,034.53 33,884.68
7 30 0.045045045 1,224.44 183.78 1,040.66 32,844.02
8 29 0.043543544 1,224.44 177.66 1,046.79 31,797.24
9 28 0.042042042 1,224.44 171.53 1,052.91 30,744.32
10 27 0.040540541 1,224.44 165.41 1,059.04 29,685.29
11 26 0.039039039 1,224.44 159.28 1,065.17 28,620.12
12 25 0.037537538 1,224.44 153.15 1,071.29 27,548.83
13 24 0.036036036 1,224.44 147.03 1,077.42 26,471.41
14 23 0.034534535 1,224.44 140.90 1,083.54 25,387.87
15 22 0.033033033 1,224.44 134.77 1,089.67 24,298.20
16 21 0.031531532 1,224.44 128.65 1,095.80 23,202.40
17 20 0.03003003 1,224.44 122.52 1,101.92 22,100.48
18 19 0.028528529 1,224.44 116.40 1,108.05 20,992.43
19 18 0.027027027 1,224.44 110.27 1,114.17 19,878.26
20 17 0.025525526 1,224.44 104.14 1,120.30 18,757.96
21 16 0.024024024 1,224.44 98.02 1,126.43 17,631.53
22 15 0.022522523 1,224.44 91.89 1,132.55 16,498.98
23 14 0.021021021 1,224.44 85.77 1,138.68 15,360.30
24 13 0.01951952 1,224.44 79.64 1,144.80 14,215.50
25 12 0.018018018 1,224.44 73.51 1,150.93 13,064.56
26 11 0.016516517 1,224.44 67.39 1,157.06 11,907.51
27 10 0.015015015 1,224.44 61.26 1,163.18 10,744.32
28 9 0.013513514 1,224.44 55.14 1,169.31 9,575.02
29 8 0.012012012 1,224.44 49.01 1,175.44 8,399.58
30 7 0.010510511 1,224.44 42.88 1,181.56 7,218.02
31 6 0.009009009 1,224.44 36.76 1,187.69 6,030.33
32 5 0.007507508 1,224.44 30.63 1,193.81 4,836.52
33 4 0.006006006 1,224.44 24.50 1,199.94 3,636.58
34 3 0.004504505 1,224.44 18.38 1,206.07 2,430.51
35 2 0.003003003 1,224.44 12.25 1,212.19 1,218.32
36 1 0.001501502 1,224.44 6.13 1,218.32 0.00
666 666 1.00 44,080.00 4,080.00 40,000.00 N/A

• ISSN: 2224-8358 30
 Arabian Journal of Business and Management Review (Kuwait Chapter)

Appendix B

(1) (2) (3) (4) (5) (6)

Months Months Monthly Profit per Principal per Outstanding
Installment, Month (Simple month (Simple Principal (SPC),
RM Profit), RM Profit), RM RM
1 36 1,224.44 113.33 1,111.11 38,888.89
2 35 1,224.44 113.33 1,111.11 37,777.78
3 34 1,224.44 113.33 1,111.11 36,666.67
4 33 1,224.44 113.33 1,111.11 35,555.56
5 32 1,224.44 113.33 1,111.11 34,444.44
6 31 1,224.44 113.33 1,111.11 33,333.33
7 30 1,224.44 113.33 1,111.11 32,222.22
8 29 1,224.44 113.33 1,111.11 31,111.11
9 28 1,224.44 113.33 1,111.11 30,000.00
10 27 1,224.44 113.33 1,111.11 28,888.89
11 26 1,224.44 113.33 1,111.11 27,777.78
12 25 1,224.44 113.33 1,111.11 26,666.67
13 24 1,224.44 113.33 1,111.11 25,555.56
14 23 1,224.44 113.33 1,111.11 24,444.44
15 22 1,224.44 113.33 1,111.11 23,333.33
16 21 1,224.44 113.33 1,111.11 22,222.22
17 20 1,224.44 113.33 1,111.11 21,111.11
18 19 1,224.44 113.33 1,111.11 20,000.00
19 18 1,224.44 113.33 1,111.11 18,888.89
20 17 1,224.44 113.33 1,111.11 17,777.78
21 16 1,224.44 113.33 1,111.11 16,666.67
22 15 1,224.44 113.33 1,111.11 15,555.56
23 14 1,224.44 113.33 1,111.11 14,444.44
24 13 1,224.44 113.33 1,111.11 13,333.33
25 12 1,224.44 113.33 1,111.11 12,222.22
26 11 1,224.44 113.33 1,111.11 11,111.11
27 10 1,224.44 113.33 1,111.11 10,000.00
28 9 1,224.44 113.33 1,111.11 8,888.89
29 8 1,224.44 113.33 1,111.11 7,777.78
30 7 1,224.44 113.33 1,111.11 6,666.67
31 6 1,224.44 113.33 1,111.11 5,555.56
32 5 1,224.44 113.33 1,111.11 4,444.44
33 4 1,224.44 113.33 1,111.11 3,333.33
34 3 1,224.44 113.33 1,111.11 2,222.22
35 2 1,224.44 113.33 1,111.11 1,111.11
36 1 1,224.44 113.33 1,111.11 0.00
666.00 666.00 44,080.00 4,080.00 40,000.00 N/A

• ISSN: 2224-8358 31