MURABAHAH
Murabahah was originally an exchange transaction in which a buyer purchases items from a seller at a specified profit margin payable to the seller. It is assumed that the seller will divulge his costs accurately, such that the profit-margin can be agreed accurately. Hence this type of sale is a form of ‘trust sale’ since the buyer must trust that the seller is disclosing his true costs. Where a trader acts on behalf of another party in buying goods, the murabahah mark-up may be seen as a payment for the trader’s service in locating, transporting and delivering the goods.
The amount of the profit margin in money terms should be specified. The gain made by the seller is not seen as a reward for the use of his money capital, since it is not permissible to rent out money in Islam, but is instead seen as a profit on the sale of goods. However, this kind of sale of goods for money should be distinguished from a transaction in which a bank or financier buys an item and simultaneously sells it on at a profit to a customer. This operation is known as ‘murabahah to the purchase-orderer’. To some commentators, murabahah to the purchase-orderer is a controversial technique since it can easily be used as a means of circumventing the prohibition on riba. (more…)
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