Islamic finance
A Murabaha is a Murabaha, everywhere it appears
Islamic contracts in neotra carry their own names, contract terms and GL treatment. A Murabaha appears as a Murabaha in the app, the back office, the customer's statement and the general ledger, with the sale price fixed at contract and profit posted to a profit on sale account rather than an interest income account.
Ledger postings for a Murabaha, illustrative
Car cost 20,000.00, disclosed profit 3,000.00, 48 monthly instalments.
| Event | Debit | Credit |
|---|---|---|
| Purchase from dealer | Murabaha inventory 20,000.00 | Cash or dealer payable 20,000.00 |
| Sale to customer | Murabaha receivable 23,000.00 | Murabaha inventory 20,000.00 and deferred profit 3,000.00 |
| Each instalment received | Cash 479.17 | Murabaha receivable 479.17 |
| Profit recognised each month | Deferred profit 62.50 | Profit on Murabaha sale 62.50 |
| Late payment charge | Customer account | Charity payable |
The final instalment of 479.01 absorbs the rounding difference. The profit recognition method and account names are set with the client's Shariah supervisory board before go-live.
Supported contracts
| Contract | How neotra runs it | Status |
|---|---|---|
| Murabaha | Fixed sale price of cost plus disclosed profit, flat schedule, no recalculation; late payment charges credited to a charity account | Core and module |
| Qard Hasan | Benevolent loan repaying principal only, with an optional administrative fee at actual cost | Core |
| Wadiah and Qard current accounts | Zero-return current accounts with guaranteed principal | Core |
| Commodity Murabaha | Commodity purchase and sale leg recorded before the customer sale | Module |
| Ijara Muntahia Bittamleek | Lease with rental schedule, asset ownership by the bank, and title transfer at the end of the term | Module |
| Diminishing Musharaka | Joint ownership with periodic purchase of the bank's units and rent on its remaining share | Module |
| Istisna | Staged disbursement against construction or manufacturing milestones | Module |
| Mudaraba and Wakala accounts | Investment accounts in profit pools; profit computed per pool and distributed by weighted balance and agreed ratio | Module |
Shariah governance
The client's Shariah supervisory board approves each contract configuration, its GL treatment and its customer documents before go-live. neotra provides the board with the configuration, sample schedules and journal entries for review against the AAOIFI standards the institution applies.
Start with a two-hour discovery session
With your business, finance, IT and Shariah teams, we select the modules, the first product line and the pilot's exit tests.