SUMMARY

Bai’Mu’ajjal

(sale on deferred payment basis)

Bai’Mu’ajjal may be defined as a contract between a buyer and a seller under which the sellers
sells certain specific goods (permissible under Islamic Shariah and the law of the country), to the
buyer at an agreed fixed price payable at a certain fixed future date in lump-sum of within a fixed
period by fixed.
EXAMPLE: if the current cost of a bag of fertilizer to the bank is Rs. 50, the bank may sell it
through its agent to farmers needing bank finance at Rs. 55 subjects to actual payment of this
price after an agreed period. The bank would, however, pay Rs. 50 to its agent prior to or
immediately after the supply of the fertilizer by the agent under its instructions.

MURABAHA
Murabaha is a kind of sale where the seller expressively mentions the cost of the commodity
purchased and sells it to another person by adding some profit thereon.
The distinguishing feature of MURABAHA from ordinary sale is:
• The seller discloses the cost to the buyer.
• And a known profit is added.

MURABAHA AS A MODE OF FINANCING:

Murabahah is not a mode of financing. It is only a way to escape from “interest”. This instrument
should be used as a transitory step taken in the process of Islamisation and its use should be
restricted only to those cases where Mudarabah or Musharakah are not practicable. Murabahah
transaction does not have existence by merely replacing word of “interest” with “profit”, It is a
mode of financing that has been allowed by the Shari’ah scholars permissible.

FEATURES OF MURABAHAFEATURES OF MURABAHA

 MURABAHA finance is not a loan given on interest, it is a sale of Asset(s) for
cash/deferred price.
 It is the obligation of the Seller to disclose the Cost and Profit to the Buyer.
 MURABAHA Finance can only be used for the purchase of fresh Asset(s) only.
 Buy-Back arrangement is prohibited. This means that MURABAHA transaction cannot
be executed for the Asset(s) already purchased by the Customer.
 MURABAHA Transaction can either be a cash sale (Spot Payment MURABAHA)
 or a credit sale (Deferred Payment MURABAHA) or a combination of both.
 Payment of MURABAHA Price can be made in lump sum or in installments or
combination of both.
 It is a fixed price sale and normally is done for short term.
 The MURABAHA Finance can be used to meet the working capital requirements.
However, it cannot be used to meet the liquidity requirements.