Mark-Up

Definition of "Mark-Up"

A financing technique adopted by some Islamic banks. It is an agreement in which the bank agrees to finance the purchase of equipment or some commodity for its client at a price that includes a fixed pre- agreed profit for the bank. The pre-fixed margin of the bank is called mark-up. If the client does not meet his obligation on due date, the bank cannot add anything to this mark-up. It is treated as a component of the price and cannot be enhanced subsequently by the bank.