Mudaraba Term Deposit (MTDR) Calculator

Disclaimer: This calculator is provided for educational and estimation purposes only and does not constitute formal financial advice.

What a Mudaraba term deposit actually is

A Mudaraba term deposit — often abbreviated MTDR — is the Islamic-finance counterpart to a certificate of deposit. Two parties are named in the contract. The Rabb-ul-Maal is the capital provider: the depositor, who places a lump sum with the bank for a fixed term. The Mudarib is the fund manager: the bank, which invests that capital in Shariah-compliant activities and shares the resulting profit with the depositor according to an agreed ratio.

That structure is the entire difference from a conventional CD. A CD is a loan: the bank borrows the deposit and contractually owes a fixed rate regardless of how its own lending or investment book performs. A Mudaraba deposit is a partnership: the depositor’s return depends on what the bank’s underlying investments actually earn, and the two parties share that outcome rather than one guaranteeing it to the other. Islamic finance prohibits riba — a fixed, predetermined return on capital, treated as interest — and profit-and-loss sharing is the mechanism that replaces it.

Why the rate is “provisional,” not guaranteed

At account opening, the bank publishes a provisional profit rate — an estimate, based on how its investment pool has been performing, of what this term is likely to pay. It is not a promise. The real profit rate is only finalized at maturity, once the bank knows what its underlying investments actually returned over the period. If the pool outperforms the estimate, depositors get more than the provisional rate; if it underperforms, they get less.

That is exactly why this calculator does not report one number. It runs the same simulation three times — at the provisional rate, and at a rate band of plus or minus a variance you set around it — so the low and high outcomes are visible from the start rather than discovered as a surprise at maturity. A narrower variance means you are more confident the bank’s estimate will hold; a wider one reflects a pool whose returns have been less predictable.

How profit is actually calculated

Within each term, profit accrues as simple, pro-rata interest on that term’s own base — it is not sub-compounded day by day inside the term itself:

Here $B_i$ is the base going into term $i$, $r$ is the annual rate for that simulation (low, provisional, or high), and $m$ is the term length in months. Total profit across the whole horizon is simply the sum across every term:

Revolving: what happens at each renewal

At maturity, most depositors do not withdraw — they let the deposit revolve (auto-renew) into a new term. What happens to that term’s profit during the roll-over depends on which of the two revolving modes the account uses.

Under principal and profit revolves, next term’s base absorbs the profit just earned: $B_{i+1} = B_i + \text{Profit}_i$. Each subsequent term then earns profit on a larger balance, which is genuine compounding — the same mechanism as the compound-interest calculator, except the compounding period is one deposit term instead of always a year.

Under principal only revolves, the base never changes — $B_{i+1} = B_i$ — because that term’s profit was paid out to the depositor in cash at renewal rather than reinvested. The deposit’s own balance only ever holds the original principal plus whichever term’s profit has not yet been paid out, which is the final one: $\text{Maturity Value} = P + \text{Profit}_n$.

The table below walks the calculator’s default inputs — a $10,000 deposit, 6-month terms, an 8% provisional rate — through all four terms under principal-and-profit revolving:

Total profit across the four terms is $1,698.59, and since the base absorbed every term’s profit, the final maturity value equals the final base: $11,698.59. Under principal-only revolving with the same inputs, every term’s profit is a flat $400.00 on the unchanged $10,000 base, paid out to the depositor at each renewal rather than reinvested — but the depositor still keeps every one of those payments. Across four terms that is $1,600.00 in total profit collected, for a maturity value of $11,600.00: the $10,000 principal plus every payout added together, whether or not it stayed inside the deposit.

Maturity value and total profit agree in both modes. Principal-only’s $11,600.00 is exactly the $10,000 principal plus the $1,600.00 collected, and principal-and-profit’s $11,698.59 is only $98.59 more — a small gap over just two years, because compounding needs more terms to meaningfully outpace simple, non-reinvested profit.

The rate band at maturity

Applying the same walk to the low and high ends of a 1-point variance around the 8% provisional rate produces the full band the calculator reports:

A one-point variance on this horizon swings the principal-and-profit maturity value by about $450 — roughly 4% of the deposit — and swings both the principal-only maturity value and its total profit by $400, since the principal itself never changes. That is the range you should actually plan around, not the single provisional figure the bank prints on the account opening slip.

Growth over a longer revolving horizon

Widen the horizon and the two modes separate further, because compounding only exists in one of them. Holding the $10,000 deposit at the 8% provisional rate across more 6-month terms:

At one term the two modes are identical, because there is no second term for the profit to be reinvested into yet. From there the gap widens every term: by eight terms, principal-and-profit has earned $485.69 more total profit than principal-only at the same flat rate, purely from compounding a revolving base rather than a fixed one. Maturity value tracks that same gap exactly, since both modes start from the identical $10,000 principal.

Currency: the $ sign is a placeholder

Mudaraba term deposits are a product of Islamic banks, concentrated in Bangladesh, Malaysia, Saudi Arabia, the UAE, and the wider Gulf — they are denominated in taka, ringgit, riyal, dirham, or whatever currency the issuing bank operates in, essentially never in US dollars. This calculator uses the $ symbol only because it is the shared formatting convention across every tool on this site. The arithmetic — the per-term profit formula, the rate band, the two revolving modes — is identical no matter what currency your deposit is actually denominated in. Enter your principal in your own currency and read every output figure as that same currency.

Choosing a revolving mode

The right mode depends on what you need the deposit to do. If you rely on the profit as periodic income — supplementing a pension, covering a recurring expense — principal-only revolving pays it out to you at every renewal instead of locking it away for years. If the goal is to maximize the balance for a future lump sum — a house deposit, a business investment, retirement — principal-and-profit revolving compounds every term’s profit into the next, which this calculator’s numbers show produces a meaningfully larger total over a multi-year horizon at the same rate.

Whichever mode you choose, revisit the provisional rate at every renewal. Unlike a CD, a Mudaraba deposit does not lock in today’s rate for the whole revolving horizon — every new term opens with a fresh provisional rate based on the bank’s then-current investment performance, so the 8% used above is not a promise for terms five through eight, only for the term about to start. To compare the same deposit on a fixed rate, the certificate of deposit calculator locks the rate for the whole term; to compare leaving the money liquid, the high-yield savings calculator models a variable rate instead. And to keep either figure in real terms over a multi-year revolving horizon, the inflation calculator shows what the maturity value is actually worth once prices have risen.

If the deposit is standing in for several named, dated expenses rather than one lump-sum target, the sinking fund breakdown calculator prices each of those separately against the same kind of provisional, short-term balance.