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Murabaha Part 1

This document provides an overview of Murabaha, an Islamic financing structure. [1] Murabaha involves the sale of an asset at a price that includes the original cost plus an agreed upon profit markup. [2] It can be done with or without a prior promise from the buyer to purchase the asset. [3] When there is a prior promise, it is called a "banking Murabaha" or Murabaha to the purchase orderer.

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3K views40 pages

Murabaha Part 1

This document provides an overview of Murabaha, an Islamic financing structure. [1] Murabaha involves the sale of an asset at a price that includes the original cost plus an agreed upon profit markup. [2] It can be done with or without a prior promise from the buyer to purchase the asset. [3] When there is a prior promise, it is called a "banking Murabaha" or Murabaha to the purchase orderer.

Uploaded by

sjawaidiqbal
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Al-Sadiq (A.

S) Institute of Islamic Banking, Finance & Takaful

MURABAHA

Presented By Jawaid Iqbal


Prepared by: Br. Ali Abbas Abidi
15 Rajub 1429, Saturday July 19, 2008
Murabaha - Definition
Murabaha is selling a commodity as per the
purchasing price with a defined and agreed profit
mark-up.
This mark-up may be a percentage of the selling
price or a lump sum. This transaction may be
concluded either without a prior promise to buy, in
which case is called an ordinary Murabaha, or with
a prior promise to buy submitted by a person
interested in acquiring goods through the institution,
in which case it is called a “banking Murabaha” i.e.
Murabaha to the purchase orderer.
Shari’a Standard No. (8) – Murabaha to the purchase Orderer: Accounting and
Auditing Organization for Islamic Financial Institutions)
Murabaha Transactions
at the
Asset Side
of Islamic Banks
Deposit Bases :Musharika
Mudaraba
Wakala

Asset Side Islamic


Liability Side
Banking

Deposits from
Ijara Customers
Murabaha
Dimishing Musharika
Musharika MURABAHA
Mudarba Is always at
Asset side
Murabaha
Mode of Financing
Allah has permitted Trade and Prohibited RIBA

Banking Systems
Similarity

Conventional Banking Islamic Banking


(Lending) (Murabaha)

Client Client
Knows Knows

Goods
Loan Interest % Mark-up %
Cost
Islamic Bank &
Conventional Bank

For the Purpose


Of Murabaha & Lending

Interest is
Lending Changed
Is Changed with
with Goods mark up
Parties for Completing Murabaha Contract

As Sale As Mode of Finance

Seller Buyer Client Bank Supplier

Sale on the basis


Of Both
Spot and Deferred Deferred Sales
Morabaha Sale

Bai Mu’ajjal
Spot Deferred

Not emphasize in Through Bank Direct between


Standard Buyer and Seller

Rules covered in
Not covered in
Standard
Standard
Parties to
Murabaha Transaction
Parties for Murabaha Trasaction

Bank Client Supplier


Client Request to Bank
Bank Purchases Goods from Supplier
Bank Sells Goods to Client

No Agency Relationship between Client and Bank


Parties before Murabaha Transaction

Bank Supplier

(1) Payment

(2) Sales Goods


Parties for Murabaha Transaction

Bank Client Supplier

(1) Sales Goods


No
Relation
(2) Pays in Defer
Payment basis
Agency Relationship
Between

Client and Bank


(7) Pays on
defer basis
(5) Through Offer
and acceptance
Make Murabaha (6)Consume Goods

Bank Client Supplier

(1)Make Client
his agent (3)Purchases
Goods
(2) Makes bank as his
Principal
(4)Pay cost
Of Goods
When Bank makes his client as agent
Different Contracts
to Conclude
Murabaha
Contract

First Second
Actual Purchase Murabaha Contract
Bank and Supplier Bank and Client

When Client is not an Agent of Bank


When Client is an Agent of bank

Contract

Second
First Bank and
Third
Bank And Client Supplier Murabaha Contract
Bank and Client

Contract of Although
Agency Client Buys
But

Contract between Bank and Supplier


Contract of Murabaha mean

Offer Acceptance from


From Bank Client

OR

Offer Acceptance from


From Client Bank
Relationship
Between
Client and Bank
1….First Promisor and Promisee
2….Agent and Principal (In special Case)
3….Buyer and Seller
4….Last Debtor and Creditor
Relationship between Bank and Client

Before At the Time of


Murabaha After Murabaha
Murabaha

Bank Client Bank Client Bank Client


Promisee Promisor Seller Buyer Creditor Debtor

Client Before Bank


Agent Murabaha Principal
Before
Murabaha

When no Agency When Agency contract


Between Client and bank

Bank Client
Promisee Promisor

Bank Client Client


Bank
Promisee Promisor Agent
Principal
At the Time of Murabaha:
When Goods are with the Bank

Bank Client
Seller Buyer

Owns and Posses


Sales
Goods
At the Time of Murabaha: When Goods are with the Client

Bank-Seller Client-Buyer

Owns Goods

Client Possess Goods


On Behalf of Bank

Bank has Bank Sales


Constructive
Possession over
Goods

Constructive Possession of bank


After Murabaha

Bank Client
Creditor Debtor
(Receiver of Amount) (Payer of Amount)

Pays

Receives
Appointment
of
Client As Agent
When Bank appoints Client as Agent

Goods are of Bank unable to approach


Special in Nature To Supplier

Remember it is least preferred to appoint Client on Behalf


Of Bank to purchase the Goods
Subject Matter
and
Consideration
Contract of Murabaha

Subject Matter Consideration

Existing
Goods Cost + Markup

Fixed Asset and


Consumables are allowed
Commodity under Morabaha

Include Exclude

Gold
Silver
All goods except Same Currency
Expenses of Client

It is a view those who accept Currency alternate to Gold


Cost

Hidden Disclose to Customer

Musamawa Murabaha Tawlliyah Wazia


Profit on Sale

Hidden Disclose to Customer

Musamawa Murabaha

No Profit in Wazia
And Tawlia
Goods can only be sold on the price mentioned herein

Musamawah Murabaha Tawlliyah Wazia


Price Break Up

Musamawa Murabaha Tawlliyah Wazia

Cost + Cost + Cost + Cost -


Profit Profit Zero Profit Loss
Buyers Knows

Cost and Cost and Cost and


Profit Zero Profit Loss
Nothing
about

In In In
Cost and Profit Murabaha Tawlliyah Wazia

In
Musamawa
Contract of Sale On

Deferred
Spot OR Bai Mu’ajjal

If Seller discloses
Cost and Profit to Buyer

It is a
Murabaha
Price

Bai Spot
Deferred
Mu’ajjal

Musamawah Murabaha Tawlliayah Wazia


Deferment of Price

Musamawah Murabaha Tawlliyah Wazia

Standard no.8
Covers
Murabaha
In Detail

Not Covered in detailed in Standard No. 8


End of Part 1

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