ISLAMIC ACCOUNTING AND BANKING,, UNDERGRADUATE STUDENT

Assume Mr. Rauf enters into a Housing Finance with an Islamic Bank under Diminishing Musharaka Contract. The total value of the house id OMR 1000000 where Mr. Rauf provides 30% down payment and the balance 70% is invested by the bank. Rental value of OMR 10000 per year is agreed by both parties. The bank's investment of OMR 700000 will be bought by the Mr. Messi in 10 years in 10 equal instalments.

1. Explain what is diminishing Musharaka contract based on a home financing product and how it differs from the conventional home financing product.
2. Calculate the annual payment Mr Messi will be paying to the Bank in each of the first five years. The value should show the share of rent and capital repayment separately.
3. What are the features of an Islamic current account. Compare and contrast with a conventional current account.