Murabaha
A cost-plus financing arrangement where the seller discloses the cost and profit margin.
Overview
In a Murabaha contract, the seller explicitly declares the cost of the commodity and sells it to the buyer by adding a margin of profit. The payment can be made in installments, but the price cannot be increased due to delay.
Common Applications
- Home financing
- Vehicle financing
- Trade financing
Key Features
- Transparent cost and profit disclosure
- Fixed price agreed at the beginning
- No interest or late payment penalties
- Asset must be in seller's possession before sale