Differences with Ordinary sales
Definition of Murabaha
Murabaha is an Islamic kind of sale and not a financing
where transactions on a cost plus profit basis.
A person with an asset on sale leases it to another person
who is interested to buy at a disclosed value of profit.
It is an acceptable form of credit sale that is in the Islamic
Religious law (Shariah)
The seller discloses the cost to the buyer and adds a
certain profit to it to arrive at the final selling price.
Types of Murabaha
Murabaha is divided into two
1. Murabaha with a binding promise- the contract of sale
is closed as soon as the object gets to the buyer
Murabaha with a non-binding promise- The buyer
purchases an item at a specified price including an agreed
profit.
Differences with Ordinary sales
The distinguishing feature of murabaha from ordinary
sales is that the seller discloses the cost to the buyer
and a know profit is added.
Payment of murabaha price is done at the spot, in
installments or in lump sum after a certain period
This implies that murabaha does not observe the
concept of deferred payment
