Murabaha is sales at cost plus Agreed upon profit. It is a mode of investment under which the Bank as per contract and request of the client procures certain goods permissible under Islamic Shari’ah from a third party and sells those to the client at a cost plus declared profit payable along with principal amount by cash in any future fixed date in lump sum or by installment.

Key Features

• A commodity in the true sense of the term must be involved in buying & selling.
• The Client place offer 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 Murabaha agreement with the Client.
• After that the Bank sells 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- Murabaha Agreement.
• The profit mark-up may be in lump sum or in percentage of the purchase/cost price of the goods.
• The Bank may authorize any third party to buy and receive the goods on behalf of the Bank.
• 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.