2.

0 Product Details

2.1 Scenario of Customer using Product

Mr. Amin is a 23-year-old male which is a fresh graduate who has just started his first job for
two years. He intends to own his first house in Puchong, Kuala Lumpur which is a high-rise
residential property. The property is sold at a price of RM492,400.00. To obtain financing for the
purchase, Mr. Amin approached CIMB Islamic Berhad to obtain information on the bank’s
property financing. CIMB Islamic Berhad recommended him to take out the HomeFlexi Smart-I
product. Mr. Amin is willing to contribute 10% of the price of the house (RM49,240) while
requesting the bank to finance the rest of the price (RM443,160). The bank agrees to finance Mr.
Amin’s purchase by buying the house first and reselling it to Mr. Amin at a higher price. Mr.
Amin agreed to the profit rate terms where the effective profit rate for the contract will be 2.70%
plus the base rate (BR) of the year. The contracted profit rate (CPR) of the financing product is
10.75% per annum and the monthly instalment amount will be advised by the bank through
notification letter if there is a change.

2.1.1 Modus Operandi of Product

1) Mr. Amin first has to identify the property he wishes to own and the exact cost for the
purchase of the high-rise residential property. This is because the property financing
product he wishes to take out, HomeFlexi Smart-I from CIMB Islamic is based on the
Shariah concept of Commodity Murabarah. Following the concept, the commodity
involved has to be Shariah-compliant, where residential property is considered as. On the
other hand, the exact cost of the commodity involved also needs to be determinable and
well aware by the client.
2) With the information of the property, Mr. Amin will be able to apply to take out
HomeFlexi Smart-I product from CIMB Islamic. CIMB Islamic will first assess Mr.
Amin’s credit situation and determine whether a guarantor will be needed for Mr. Amin’s
application to guarantee that Mr. Amin will fulfil his obligations specified in the contract.
The bank will then determine the profit rate to be added upon the base rate to become the
effective profit rate. The base rate of CIMB Islamic is based on two parts, which are the
 bank’s benchmark cost of funds (BCOF) and the Statutory Reserve Requirements (SRR)
cost imposed by the Central Bank of Malaysia. Any changes in the BCOF or SRR will
result in the change of the base rate. As the product follows the Shariah concept of
Commodity Murabarah, Mr. Amin has to be fully notified and aware of the profit margin
imposed by the bank when the commodity is purchased from the bank. Therefore, the
contracted profit rate of 10.75% per annum for the contract has to be acknowledged by
Mr. Amin before application. Furthermore, the expenses incurred throughout the
contracting process can be additionally applied on the total cost. Hence, a list of fees and
charges has to be provided to and acknowledged by Mr. Amin to ensure no confusion.
3) When the application is approved, Mr. Amin and the bank will enter into the Commodity
Murabarah contract. As per agreement, CIMB Islamic will contribute 90% of the
property cost whereas Mr. Amin will contribute the rest of 10%.
4) As both CIMB Islamic and Mr. Amin have contributed their respective fund parts to the
purchase of the house, the house will first be purchased by CIMB Islamic at the selling
price determined by the developer.
5) Next, CIMB Islamic will sell the house to Mr. Amin according to the selling price that
both parties agreed upon establishment of the Commodity Murabarah contract. Mr. Amin
will take over possession of the house while the house will act as the security for Mr.
Amin to fulfil his obligations in the contract.
6) Within the tenure period, Mr. Amin will need to continuously pay the bank a monthly
instalment as he uses the house. The amount of each monthly instalment is determined by
the effective profit rate of the month, amount that the bank financed and duration of the
tenure period. Calculations in the section Error: Reference source not found shows the
different scenarios where the amount of monthly instalment vary based on the base rate
and the charges implied if Mr. Amin fail to fulfil his obligation for paying the monthly
instalment on time or decides to fully settle the property financing before its maturity.
7) Once Mr. Amin paid the monthly instalments through the end of the tenure period, the
property financing will be fully settled. With the settlement of financing, the ownership
of the house will be transferred to Mr. Amin and the Commodity Murabarah contract
between both parties is terminated.
 3) 90%
(RM443,16
0) High-rise Residential
2) Apply Property in Puchong
4) CIMB
Property Islamic
Financing Purchases
Purchase
to be
Fund of
6) Pay Resold
RM492,40
Monthly
0
Instalme
nt

7) 3) 10%
Transfer (RM49,240 5) Taken Over
House ) and Becomes
Ownershi Security for
p Upon Contract
Full
Settleme
nt 1) Find
Property and
Determine
Cost

Mr. Amin

Figure 1: Modus Operandi of CIMB Home Flexi Smart-I, based on Community

Murabarah Concept
Calculation
Principal Amount: RM492,400
Margin of financing:90%
Total amount financed: RM443,160
Tenure: 35 years/ 420 months
Profit rate: Base Rate+ 2.7% p.a.
Contacted profit rate (CPR): 10.75% p.a.

Scenario 1: Today Base Rate = 2.75% p.a.

Calculation Payment (RM)
Monthly instalment: By using financial calculator: 2,365.34
End mode
12 P/YR
443160 PV
420 N
5.45 I/YR
PMT

Total profit charge at the 1 INPUT 420 550,285.99

end of the Facility AMORT
tenure: INT

Total payments at the 2365.34*420 993,442.8

end of the Facility
tenure:

Scenario 2: If Base rate goes up to 3% p.a.

Calculation Payment (RM)
Monthly instalment: By using financial calculator: 2,438.21
End mode
12 P/YR
443160 PV
420 N
5.70 I/YR
PMT

Total profit charge at the 1 INPUT 420 580,887.84

end of the Facility AMORT
tenure: INT

Total payments at the 2438.21*420 1,024,048.20

end of the Facility
tenure:

Scenario 3: If Base rate goes up to 2% p.a.

Calculation Payment (RM)
Monthly instalment: By using financial calculator: 2152.51
End mode
12 P/YR
443160 PV
420 N
4.7 I/YR
PMT

Total profit charge at the 1 INPUT 420 462,058.17

end of the Facility AMORT
tenure: INT

Total payments at the 2125.51*420 892,714.20

end of the Facility
tenure:

Scenario 4: Late payment

Compensation (Ta'widh) rate: 1% p.a. Overdue instalment(s) X Combined rate X No. of
Combined rate= Profit rate +Ta’widh Overdue day(s) 365

2365.34 X 6.45% X 30/365 = RM12.54

Scenario 5: Full settle the financing before its maturity

Early Settlement Charge [Board Rate - Discounted Rate] or 1%, whichever is

Board Rate: Bank’s normal rates lower X Outstanding Bank's Purchase Price X
Discounted rate: Bank’s promotional number of calendar days from date of first
rates at the point of the letter of offer disbursement until date of payment of Settlement
Bank’s purchase price: Facility Amount (both dates inclusive) /365 (or 366 for leap
Amount years).

Assume the promotional rate is 0.5% ,

Early full payment of 60 days
Outstanding Bank’s Purchase Price: RM 4730.68

2.7% - 0.5% = 2.2%

or
1%
Whichever is lower: 1%
1% X 4730.68X 60/365 = RM7.78