This text is replaced by the Flash movie. Technically a contract of sale in which the seller declares his cost and profit. This bank islam gold investment been adopted as a mode of financing by a number of Islamic banks.
As a financing technique, it involves a request by the client to the bank to purchase a certain item for him. The bank does that for a definite profit over the cost which is settled in advance. A contract of sale between the bank and its client for the sale of goods at a price plus an agreed profit margin for the bank. The contract involves the purchase of goods by the bank which then sells them to the client at an agreed mark-up. Used if you wish to purchase equipment or goods. We will purchase these items, and then sell them to you at cost – plus a reasonable profit. Murabaha is the most popular and most common mode of Islamic inancing.
It is also known as Mark up or Cost plus financing. The word Murabaha is derived from the Arabic word Ribh that means profit. Originally, Murabaha was a contract of sale in which a ommodity is sold on profit. The seller is obliged to tell the buyer his ost price and the profit he is making. Some portion of total finance may be offered as an interest free loan, however, the banking institutions have to make profit in order to stay in business. Hence, what course of action is open to the bank? The Murabaha model offers a solution.
The bank purchases the commodity on cash and sells it to the customer on a profit. There are a number of requirements f or this transaction to be a real transaction to meet the Islamic standards of a legal sale. The whole of Murabaha transaction is to be completed in two stages. In the first stage, the client requests the bank to undertake a Murabaha transaction and promises to buy the commodity specified by him, if the bank acquires the same commodity. The Murabaha form of financing is being widely used by the Islamic banks to satisfy various kinds of financing requirements. It is used to provide finance in various and diverse sectors e.
This is a contract sale between the bank and its client for the sale of goods at a price which includes a profit margin agreed by both parties. As a financing technique, it involves the purchase of goods by the bank as requested by its client. The goods are sold to the client with a mark-up. Repayment, usually in instalments is specified in the contract.
Q – I have observed that certain banks operating in Saudi Arabia have incorporated clauses in their Murabaha agreement that “In the event of default of payment, the customer will be black-listed and his name circulated to all other banks operating in Saudi Arabia. I feel that this will impose an unnecessary burden on the customers even though they agree to the inclusion of the clause in the Murabaha Agreement at the time of the execution. It is said the terms and conditions should be just and fair relating to transaction under the Shariah. I would like to know whether such conditions imposed in Murabaha Agreement is permissible under the Shariah. A – The problem of default in Islamic banks has become very serious.
In the interest-based loan system if the debtor defaults the interest keeps on increasing automatically which serves as a deterrent against default. But in the case of Islamic bank no extra charge can be imposed after the due date. Q – What is the Shariah ruling with regards to the purchase of a certain service and then its resale to a client? For example, if the bank were to pay a contractor to finish a building, and then sell the service to its client by means of murabaha payable in installments? A – The sale of services by means of murabahah as envisioned in the question is not lawful.