2. Abdulahi Abukar “ ABAJEY”
INTRODUCTION
The Murabaha is also similar to a form of sale
called Tawliyyah (to sell as per the
purchasing price without making profit.
Murabaha or cost plus markup sale is the first
of asset based financing contracts employed
by Islamic banks. It is the most widely used
financing tool as it somehow resembles a
loan contract.
3. When a business wants to purchase an asset, they have five
choices:
Pay cash – difficult if it is a big ticket item, say vehicle,
machinery or buildings
Get it on credit from the vendor, possibly through
interest free credit card; you can forget about getting
interest free credit from a car dealer or housing
developer.
Get a loan to buy the asset either from a conventional
financial institution.
Get an Islamic financing from an IFI.
Defer or forget about the future purchase.
Abdulahi Abukar “ ABAJEY”
4. For Islamic standards of a legal sale, Murabaha is
completed in two stages, In the First Stage, the
bank purchases a product that the client is selling
and the Second Stage, the client agrees to a
payment schedule for repurchasing the good,
Because Murabaha involves two transactions, two
sale contracts are used.
Murabaha “is a contract of sale where the seller
discloses to the buyer the actual cost of the item
to be sold in addition to the profit margin (mark
up) added, to be mutually agreed winning with the
buyer”. Abdulahi Abukar “ ABAJEY”
5. The Murabaha contract is one of the safest
branches of Islamic law, where the price of
the sale is determined based on the cost of
the commodity plus an agreed profit between
the seller and the buyer.
The Murabaha is one of the most commonly
used modes of financing by Islamic Banks and
financial institutions.
The Murabaha is a mode of financing as old
as Musharakah, Today in Islamic banks world-
over 67% of all investment transactions are
through Murabaha.Abdulahi Abukar “ ABAJEY”
6. Al-Murabaha: is a contract between
the buyer and the seller under
which the seller sells specific goods
allowable under Islamic sharia 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 the modern financial market,
Murabaha usually obeys the following
terms:
Abdulahi Abukar “ ABAJEY”
Bai Al-Murabaha
7. 1. The cost of the required items, and other relevant costs,
must be specified prior to contracting.
2. The payment date must be specified.
3. The financier maintains ownership of the purchased items
until delivery.
4. The financier bears all the costs and risks of ownership until
delivery.
5. The end user and financier must pre-agree and specify the
mark-up to be applied.
6. The mark-up applies to all relevant costs incurred by the
financier.
7. The goods subject to the transaction must be specified.
Abdulahi Abukar “ ABAJEY”
8. Murabaha Transaction : $50,000
Rate of Profit: 15%.
Murabaha Facility Annually
What is the COST-PLUS SALE?
Cos = ($50,000 x 15%) = $7,500
Murabaha Price =$7500 + 50,000= $57,500
Abdulahi Abukar “ ABAJEY”
9. TEST
You, purchased a pair of shoes for SOSH100
you wants to sell it on a Murabaha basis
with 9.5% mark-up with six month,
installment by annually The exact cost is
unknown. Calculate this Murabaha sale is.
Abdulahi Abukar “ ABAJEY”
10. 1) The customer approaches the bank
with a request for the purchase of any
commodity that can be legally sold on
credit.
2) The bank purchases the commodity
through the client as agent.
3) The bank makes payment to the
vendor/supplier.
Abdulahi Abukar “ ABAJEY”
11. 4. The customer takes delivery of the item on
behalf of the bank as agent.
5. The customer makes an offer to purchaser
and the bank accepts the offer the bank
transfer the title over to the customer upon
execution of Murabahah.
6. The customer makes payment on a deferred
basis without any overturn, discount or
rebate.
Abdulahi Abukar “ ABAJEY”
15. What are the basic rules of Murabaha?
● The subject matter must exist at the time of sale.
● The subject matter must be in the ownership of seller.
● The subject matter must be in the possession (absolute
or constructive) of seller.
● The price must be agreed and fixed at the time of sale.
● The subject matter must have value from Sharia
perspective.
The transaction can either be spot or on late payment
basis.
Abdulahi Abukar “ ABAJEY”
16. Besides the principles mentioned in the definition box of
Murabaha, we should note the following:
In a Murabaha to the purchase ordered, the promise
to buy of the customer (the purchase ordered) may
be binding or non binding. This result from different
shari’a opinions. One group of scholars view that the
promise is non-binding because:
a) The bank cannot sell what it does not have (at the
time of making the promise)
b) The goods may be faulty , deficient or unnecessary
when delivered.
Abdulahi Abukar “ ABAJEY”
17. Murabaha Transaction : $100,000
Rate of Profit: 15%
insurance 5%
Murabaha Facility 90 Days
Calculate COST-PLUS SALE?
insurance Cost: 100,000 x 5% = 5,000
Total Cost: 100,000 + 5,000 = $105,000
Profit: 105,000 x 15% x 90/365 = $3,883
Murabaha Price: 105,000 + 3,883 = $108,883
Installment: 108,883 / 3 = $36,294
Abdulahi Abukar “ ABAJEY”
18. This seven steps are involve to implements the
transaction of Murabaha:
1. Client purchase requisition or request.
2. Master Murabaha facility agreement
3. Clients independent promise
4. Agency agreement
5. Control of Murabaha goods
6. Offer and acceptance
7. Transfer of possession
Abdulahi Abukar “ ABAJEY”
Steps of Murabaha
Transactions
19. 1. Define Murabaha?
2. When a business wants to purchase an asset,
they have five choices what are they?
3. What Murabaha usually obeys in financial
markets?
4. What are the basic rules of Murabaha?
5. There are seven steps are involves the
transaction of Murabaha what are they?
Abdulahi Abukar “ ABAJEY”
20. Abdulahi Abukar “ ABAJEY”
Test : 1
Financial Amount : $100
Profit Rate : 11%.
Murabaha Facility 1 year
What is COST?
Test : 2
Murabaha Transaction : $150,000
Rate of Profit: 25%
Freight insurance 0.50%
Murabaha Facility Annually
Calculate COST-PLUS SALE?
21. Test : 3
Cost of Good : $1,000,000
Profit Rate : 16%.
Murabaha Facility Four Equal installment
Insurance: 10%
Calculate ?
Test : 4
Cost of Good : $500,000
Profit Rate : 2.5%.
Murabaha Facility Semiannual
Insurance: 3%
What is COST-PLUS SALE?
Abdulahi Abukar “ ABAJEY”