Meet Your Short-Term Business and Individual Need for making purchases the Shariah compliant way
Murabaha is a sale transaction, whereby the seller (Bank) expressly mentions the cost and the Profit charge thereon while quoting the price.
Purpose
The purpose is to cater the short-term financing requirements of the customer. Under Murabaha arrangement BANK AL HABIB-ISLAMIC BANKING DIVISION allows customers to purchase the goods / commodities (raw material/ finished goods etc.) from time to time for business use up to a specific limit assigned.
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 the seller.
- The Price must be certain and agreed at the time of sale
- The subject matter must have value from Shariah perspective
- The transaction can either be spot or on deferred payment basis.
Target Market
The target Market for Murabaha Finance is Corporate / Commercial / Retail and SME sectors to meet their working capital needs. These entities must fulfill BANK AL HABIB-ISLAMIC BANKING DIVISION credit entitlement criteria.
Difference between Murabaha & Conventional Loan
| Distinguishing Factor | Murabaha | Conventional loan |
|---|---|---|
| Contract | A sale contract whereby bank sells asset (goods / commodities) to customer. | A loan contract, whereby Bank lends money to customer. |
| Relationship | The relationship between bank and customer is that of seller and buyer. | The relationship between bank and customer is that of lender and borrower. |
| Income | Income on Murabaha is the outcome of sale i.e. Profit | Income is based on Mark-up on loan. |
| Delayed Payment | In case of delayed payment, the customer undertakes to pay charity | Mark-up continues to accrue till the loan is repaid. |
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