Bai’ Al-Murabaha is a contract between the Buyer and the Seller under which the Seller sells specific goods permissible under Islamic Shari’ah and Law of the land to the Buyer at a cost plus agreed profit payable in cash on or before a fixed future date in lump sum or by installments or single delivery. The profit (marked-up) may be fixed in lump-sum or in percentage of the cost price of the goods. In case of Bai’ Al-Murabaha, Bank procures the goods as per indent of the customer, retain it in its custody and sell the same part by part or at a time to the client who gave indent for the goods. In case of early adjustment, rebate on profit payable may be considered to the Client.
Features of the Bai’ Al-Murabaha
- A commodity in the true sense of the term must be involved in buying & selling.
- It is permissible for the Client tooffer an order to the Bank to purchase goods mentioning its specification and committing himself to buy the same from the Bank on Murabaha (cost plus agreed upon profit)
- The Bank should purchase the goods as per specification of the Client to acquire ownership of the same before signing the Bai Al-Murabaha agreement with the Client.
- After purchase of goods the Bankshould bear the risk of goods until those are actually sold and delivered to the Client, i.e., after purchase of the goods by the Bank and before selling of those on Bai Al-Murabaha to the Client, if the goods are damaged or defective, Bank should be liable and bear the responsibilityof damage unless there is an agreement with the Client to release the Bank fromsuch responsibilities.
- It is permissiblefor the Bank tosell the goods at a higher price (Cost + Profit) to earn profit. The cost of goods sold and profit mark-up therewith shall separately and clearly be mentioned in the Bai’ Al-Murabaha Agreement. The profit mark-up may be in lump sum or in percentage of the purchase/cost price of the goods. But the percentage of the profit shall have no relation with time or expressed in relation with time, such as per month, per annum etc.
- The Bank may authorize any third party to buy and receive the goods on behalf of the Bank. The authorization must be in a separate contract.
- The Client is bound to purchase the specific goods from the Bank; else he should indemnify the damages caused by breaking the promise without excuse.
- It is permissibleto the Bank to take Cash/Collateral security as guarantee to keep the promise or to indemnify the damages.
- It is also permissiblefor the Bank to document the investment details by a guarantor or through mortgage or both. These formalities can be obtained before or at the time of signing the Agreement.
- Once the price is fixed as per agreement it can not be further increased.
Categories of Proposal under Bai’ Al-Murabaha
- Murabaha Commercial
- Murabaha Industrial
- Murabaha Agriculture
- Murabaha Import (TR)
- Murabaha Export (Pre-Shipment)
- Consumer Investment Scheme