Chap 08 - Murabaha

7/23/2019 Chap 08 - Murabaha

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Islamic Financial

Products and Processes

Ameenullah Sheikh

[email protected]



Trade Financing/Comodit

Financing



• Islam prohibits charging fixed interest on money,

but permits charging fixed profit on sale of goods.

This clears a common misconception that charging

fixed profit is haram.

Murabaha



Presen

Murabaha

• Murabaha is a particular kind of sale wherethe transaction is done on a “cost plus profit”basis i.e. the seller discloses the cost to thebuyer and adds a certain profit to it to arrie

at the final selling price.

• The distinguishing feature of Murabaha fromordinary sale is!

" The seller discloses the cost to the buyer." #nd a known profit is added.



Conditions of Subject Matter :

$% &ub'ect Matter of murabaha must be existing at the time of sale.

(% &ub'ect Matter of murabaha must

be in the ownership of the seller.

)% &ub'ect Matter of murabaha must be inthe physical or constructie possession of the seller. *Transferof +isk +eward and permission of use- Tasrruf are basicingredients of onstructie /ossession



Conditions of Subject Matter :4) &ub'ect Matter of sale must be of a proper

alue

0% &ub'ect Matter of murabaha should notbe a thing which is not used except fora 1aram /urpose.

2% &ub'ect Matter of Murabaha must be&pecified Identified to the buyer.



PRICE OF MURABAHA:PRICE OF MURABAHA:

$% The price must be fixed in Murabaha

*lump sum-by percentage%

(% The price in Murabaha may be spotor deferred.

)% If the price is deferred in Murabaha,the installments and due date mustbe determined.



4) 3hen once the price is fixed it can not be

changed.

0% Increase in the price not allowed incase of default.

2% 4luctuation in Murabaha price is not permissible.

PRICE OF MURABAHA:PRICE OF MURABAHA:



Expenses ofExpenses ofMurabaha:Murabaha: The direct

expenses will beadded in the costof goods. (Costacquiring the

commodity likefreight andcostume duty)



• It is a contract wherein the institution, upon re5uest by thecustomer, purchases an asset from the third party*a supplier%and resells the same to the customer either againstimmediate payment or on a deferred payment basis.

• It is a bunch of contracts completed in steps and ultimatelysuffices the financial needs of the client.

• The se5uence of their execution is extremely important tomake the transaction &hariah compliant.



$. lient and bank sign an agreement to enterinto Murabaha *MM4#%.

greement to!urabaha

Bank Client

Steps in Murabaha financing



Presen

(. lient is appointed as agent to purchasegoods on bank6s behalf

greement to!urabaha

Bank Client


gency

greement



). 7ank gies money to agent-supplier forpurchase of goods.

"isbursement to the agent orsupplier

gency

greement

Supplier

greement to!urabaha

Bank Client




8. The agent takes possession of goods on bank6sbehalf.

Transfer of#isk

"eli$eryof goodsendor

Bank !gent




0*a%. lient makes an offer to purchase thegoods from bank through a declaration.

%&er topurchase

Bank

Clien

t




0*b%. 7ank accepts the offer and sale isconcluded.

!urabahagreement '

Transfer of Title

Bank

Client




2. lient pays agreed price to bank according toan agreed schedule. 9sually on a deferred

payment basis *7ai Mua''al%

ayment of rice

Bank

Client




Any Questions??THANK YOU

Documents

Chap 08 - Murabaha