Murabaha

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Murabaha is a type of sales contract used in Islamic finance in which a bank buys a product on behalf of a client, clearly mentioning the cost incurred in buying the product, and resells the product to the same client with an agreed mark-up at a later date. The bank usually pays for the product in full and allows the client to pay the bank back in installments.

Murabaha is a very popular contract in Islamic finance. It is Shariah-compliant because there is no interest rate on the payment the financial institution gives to the client.[1]


References[edit]

  1. Murabaha Definition. Financial Times Lexicon.