Determination of Sale Price

in Bai Deals/Transactions,
rebate, Compensation etc.

1
 WHAT IS SALE?

Sale is defined in the Islamic Fiqh as

follows:

“Exchange of a thing (subject matter) of

value with another thing of value, with
mutual consent”.
 COMPONENTS OF VALID SALE

SALE

CONTRACT SUBJECT PRICE POSSESSION

MATTER

•Offer/Acceptance •Existence •Quantified •Physical

•Buyer/Seller •Ownership •Certain •Constructive
•Possession
•Valuable
•Specific
•Halal Purpose Instant and absolute
•Delivery Unconditional
3
 Bai Murabaha
The term Bai Murabaha has been derived from the Arabic word-

• ‘Bai’ & ‘Ribhun’

• ‘Bai’ means- ‘Purchase & Sale’

• ‘Ribhun’ Means- ‘Profit’. Characteristics of this profit is-

‘Agreed upon profit’
• The Murabaha can be denoted as “Sale With Profit”.

• ‘Bai Murabaha’ means- ‘Sale of goods on agreed

upon profit’
Bai-Murabaha

Bai-Murabaha may be defined as a contract

between a Buyer and a Seller under which
the seller sells certain specific goods
(permissible under Islamic Shari'ah and the
law of the land) to the buyer at a cost plus
agreed profit payable in cash or on any fixed
future date in lump sum or by installments.
 ‫‪Shariah Evidence of Bai Murabaha‬‬

‫• َيا أَ ُّي َها ا َّل ِذينَ آ َم ُنو ْا إِ َذا َت َدا َين ُتم ِب َد ْي ٍن إِ َلى أَ َج ٍل ُّم َ‬
‫س ًّمى‬
‫َفا ْك ُت ُبوهُ‬
‫)‪(Sura Al Baqara-282‬‬

‫ار ًة‪َ V‬ع‪ V‬ن َت َر ٍ‬

‫اض‪V‬‬ ‫ِين‪ V‬آ َم ُنوا اَل َتأْ ُكلُوا أَ ْم َوا َل ُك‪V‬م َب ْي َن ُك‪V‬م ِبا ْل َباطِ ِل‪ V‬إِاَّل أَ‪V‬ن َت ُك َ‬
‫ون‪ V‬ت َِج َ‬ ‫• َي‪V‬ا أَ ُّي َه‪V‬ا الَّذ َ‬
‫ِّمن ُك ْم‪ ‬‬
‫)‪(Sura Al Nisa-29‬‬
‫س‪َّ V‬ل َم َب َع َث‪َ V‬م َع ُه‪ِ V‬بدِي َن ٍ‬
‫ار‬ ‫ص‪َّ V‬لى هَّللا ُ َع َل ْيه‪َ ِV‬و َ‬‫س‪V‬ول َ هَّللا ِ َ‬ ‫حزام أَنَّ‪َ V‬ر ُ‬ ‫• َو َع‪V‬ن َحكِي‪V‬م ب‪V‬ن َ‬
‫ش َت َرى‬‫ار ْي ِن‪َ V‬ف َر َج َع‪َ V‬فا ْ‬ ‫ار َو َبا َع ُه‪ِ V‬بدِي َن َ‬‫ش‪V‬ا ِبدِي َن ٍ‬
‫ش َت َرى َك ْب ً‬ ‫ض ِح َّي ًة‪َ V‬فا ْ‬‫ي‪َ V‬ل ُه‪ِ V‬به‪ ِV‬أ ُ ْ‬
‫ش َت ِر َ‬ ‫لِ َي ْ‬
‫س‪V‬ول‬ ‫ضل َ م‪V‬ن اأْل ُ ْخ َرى َفتص‪V‬دق َر ُ‬ ‫ار ا َّلذِي ا ْس‪َ V‬ت ْف َ‬‫ار َف َجا َء‪ِ V‬ب َه‪V‬ا َو ِبالدِّي َن ِ‬‫ض ِح َّي ًة‪ِ V‬بدِي َن ٍ‬‫أُ ْ‬
‫ارته‪َ .‬ر َواهُ ال ِّت ْر ِمذ ّ‬
‫ِي‬ ‫ار َك َل ُه فِي ت َِج َ‬ ‫ار َف َد َعا َل ُه أَنْ ُي َب َ‬ ‫هللا صلى ِبالدِّي َن ِ‬

‫‪The Prophet (PBUH) purchased a she‬‬

‫‪camel from Abu Bakr (RAA) for use as‬‬
‫‪transportation from Madinah...‬‬
Bai-Murabaha are of two kinds

1. Ordinary Bai-Murabah:
Transaction between two parties buyer & seller without
any promise.
2. Bai-Murabaha on order & promise:
-Participation of three parties.
- Buyer 1st party promises to buy some goods placing
order to 2nd party (intermediary trader).
-The 2nd party procures the goods from the seller/supplier
the 3rd party.
- Bank act as 2nd party (intermediary trader).
 ‘Bai Muajjal’
The term Bai Muajjal has been derived from the Arabic
word-

• ‘Bai’ & ‘Ajal’ (‫ ﺒﻳﻊ‬and ‫)ﺍﺟﻝ‬

• ‘Bai’ means- ‘Purchase & Sale’

• ‘Ajal’ Means- ‘Fixed and Defined period’

• ‘Bai Muajjal’ means- ‘Sale of goods for Fixed and

Defined period’ or ‘Deferred Sale’
Bai-Muajjal (Deferred Sale):

Bai-Muajjal may be defined as a contract

between-a Buyer and a Seller under which the
Seller sells certain specific goods (permissible
under Shari'ah and Law of the Country), to the
Buyer at an agreed fixed price payable at a
certain fixed future date in lump sum or within a
fixed period by fixed installments.
‫‪Shariah Evidence of Bai Muajjal‬‬

‫َوأَ َحل َّ هّللا ُ ا ْل َب ْي َع َو َح َّر َم ِّ‬

‫الر َبا‬

‫ش َت َرى ِمنْ‬‫سلَّ َم ا ْ‬ ‫صلَّى هَّللا ُ َعلَ ْي ِه َو َ‬

‫أَنَّ ال َّن ِب َّي َ‬
‫ِي َط َعا ًما إِلَى أَ َج ٍل َو َر َه َن ُه د ِْر ًعا لَ ُه ِمنْ‬
‫َي ُهود ٍّ‬
‫‪َ .‬حدِي ٍد‬
‫‪ ‬‬ ‫ث فِي ِهنَّ ا ْل َب َر َك ُة ا ْل َب ْي ُع إِلَى أَ َج ٍل‬ ‫َثاَل ٌ‬
‫ت اَل‬
‫ِير لِ ْل َب ْي ِ‬
‫شع ِ‬ ‫ض ُة َوأَ ْخاَل ُط ا ْل ُب ِّر ِبال َّ‬ ‫ار َ‬ ‫َوا ْل ُم َق َ‬
‫‪ " .‬لِ ْل َب ْي ِع‬
Difference between Murabaha and Muajjal
SL Murabaha Muajjal
No.
01 Sale on profit Sale on credit

02 Profit is main issue Credit is main issue

03 Must be on profit May be on loss

04 There must have two There may have one

buying/selling contacts buying/selling

05 Purchase price must Purchase price may not be

be mentioned mentioned
 Murabahah – Historical perspective
• Introduced as new form of sale in second half of First
Hijrah century as a sale with necessary condition of
declaring cost by the seller and agreeing on profit
margin by both the seller and the purchaser [Al-
Muwatta, Imam Malik]
• Modifications were made by Imam Shafii’, including an
order of the purchaser, who could subsequently
exercise the option not to purchase the same, and
also included credit transaction
• He clearly bifurcated `two sales’ transactions
 Features of Bai Murabaha
1. There are three parties in banking Murabaha
(a. Purchaser b. Bank c. Supplier)

2. The Client offer an order to purchase particular goods

by the bank

3. The cost of goods sold and profit mark-up there with

shall separately and clearly mentioned in the
agreement
4. It is permissible for the bank to authorize any third
party or client himself to buy and receive the goods on
bank’s behalf
Operational Procedure
RM- Relationship Management
1. Induction & Selection of client
2. Application
3. Processing & Appraisal
a. Assessment of Investment Needs
b. Assessment of Investment Risk
IRM- Investment Risk Management
1. Investment Approval/Sanction
2. Documentation
3. Disbursement
4. Investment Monitoring
5. Investment Recovery
5 C’s of Creditor
Sanctioning Authority of Bai Murabaha

1. Branch

2. Zonal Head

3. Head Office -Div-Wing

4. MD (Managing Director)

5. MC (Management Committee)

6. EC (Executive Committee)

7. Board of Directors
Documentation
• Initial Papers

• Charge Documents

• Mortgage Documents

• Others
Disbursement of Bai Murabaha

a. Disbursement for purchasing goods

b. Payment of purchase price to Supplier

c. Determination of sale price/Mark-up

d. Compliance of Shariah rules

e. End use supervision of Bank Investment

 Determination of the purchase price

A. Actual purchase price of the commodity

Add (+)
B. Additional costs
 Transportation
 Commission on the purchase of the commodity
 TT/DD/ Online commission
 TA/DA
 Transit insurance
 Godown Rentals
C. Total Cost Price of the commodity
 Pricing of Murabahah [Example-1]

Purchase of poultry feed stock

• Murabahah transaction: TK. 30,000
• Murabahah Facility: 90 Days
• Payment: Each month
• Rate of Profit: 15% p.a.
• Freight: 5% of cost of goods
• Security: Personal/group
guarantee
 Pricing of Murabahah [Example-1]:

Particulars Amount (Rs.)

Cost of goods TK.. 30,000
Rate of Profit 15% p.a.
Freight/Insurance 5% of cost
Total cost 30000 + 1500 =31500
Profit 31500 x 15% x 90/365 = 1165
Murabahah Price 31500+1165 = 32665
Installment 32665/3=10,888/=
Principal. 31500/3=10500/
Profit. 1165/3 = 388/
Total ins. 10888/=

M. Khaleequzzaman IBF, IIUI

 Pricing of Murabahah [Example-2]
Your investment client applied to you a Bai Murabaha
Investment of Tk. 25 lac to purchase 1500 psc Fan from
Bank procuring from GEC, the fan producer. Cash
security margin 20%, Investment period 1 (one) year,
profit rate 15% as per sanction terms. You have to
calculate:

I.Amount of margin to be deposited by the investment

client in investment account.
II.Bank’s initial principal investment.
III.Bank’s profit markup.
IV.Bank’s total/gross investment or sale price.
V.Bank’s purchase price of goods and accounting
journal for payment of purchase of price to the supplier,
margin realization and posting thereof.
Solution
I. Margin 25,00,000*20% = Tk. 5,00,000/-
II. Bank’s initial principal investment = 25,00,000-
5,00,000 = Tk. 20,00,000/-
III. Bank’s profit markup = 20,00,000*15% = Tk. 3,00,000/-
IV. Bai Murabaha = 25,00,000+3,00,000 = Tk. 28,00,000/-
V. Purchase price Tk. 25,00,000
a) Cash/AWCA/Client’s A/c..………. Dr. Tk. 5,00,000/-
To Bai Murabaha TR……..…….….Cr. Tk. 5,00,000/-
 
b) Bai Murabaha TR……..…………... Dr. Tk. 28,00,000/-
To Pay Order favoring GEC.……….Cr. Tk. 25,00,000/-
To Profit receivable.……..……..….Cr. Tk. 3,00,000/-
Bai-Salam
Meaning:
The terms “Bai” and “Salam” have been derived from Arabic
words ‫ ﺒﻳﻊ‬and ‫ﺴﻠﻢ‬. The word ‫ ﺒﻳﻊ‬means purchase and sale
and the word ‫ ﺴﻠﻢ‬means “advance”. “Bai-Salam” means
advance sale and purchase.
Definition:
Bai-Salam may be defined as a contract between a Buyer and
a Seller under which the Seller sells in advance the certain
commodity (ies)/product(s) [permissible under Islamic
Shariah and the law of the land] to the Buyer at an agreed
price payable on execution of the said contract and the
commodity(ies)/product(s) is/are delivered as per
specification, size, quality, quantity at a future time in a
particular place.
‫‪Shariah Rules of Bai Salam‬‬

‫ِين‪ V‬آ َم ُنو ْا إِ َذا َتدَ ا َين ُت‪VV‬م ِبدَ ْي ٍن‪ V‬إِلَ‪VV‬ى أَ َج ٍل‪ُّ V‬م َ‬
‫س‪ًّ V‬مى‬ ‫َي‪VV‬ا أَ ُّي َه‪VV‬ا الَّذ َ‬ ‫•‬
‫َف ْاك ُت ُبوهُ‪.‬‬

‫ص‪V‬لَّى‬ ‫س‪V‬ول ُ هَّللا ِ َ‬‫س‪َ V‬رضِ َي‪ V‬هَّللا ُ َع ْن ُه َم‪V‬ا‪َ ،‬قال َ‪َ :V‬ق ِد َم‪َ V‬ر ُ‬ ‫• َع ِن‪ V‬ا ْب ِن‪َ V‬ع َّبا ٍ‬
‫ام ‪V‬‬ ‫اس ‪ُ V‬ي ْس ‪V‬لِفُونَ فِ‪VV‬ي ال َّث َم ِر َ‬
‫الع َ‬ ‫س ‪V‬لَّ َم ال َمدِي َن َة ‪َ ،V‬وال َّن ُ‬ ‫هللا َعلَ ْي ِه ‪َ V‬و َ‬
‫ُ‬
‫ش َّ‪V‬ك إِ ْس‪َ V‬ماعِ يلُ‪َ ،‬ف َقال‪َ « :َV‬م ْن‪V‬‬ ‫العا َم ْي ِن‪ ،V‬أَ ْو َقال َ‪َ :V‬عا َم ْي ِن‪ V‬أَ ْو َثالَ َث ًة‪َ ،V‬‬ ‫َو َ‬
‫وم‪َ ،‬و َو ْز ٍن َم ْعلُ ٍ‬
‫وم‬ ‫ِف فِي َك ْي ٍل َم ْعل ُ ٍ‬ ‫ف فِي َت ْم ٍر‪َ ،‬ف ْل ُي ْسل ْ‬ ‫سلَّ َ‬
‫َ‬
 Bai-Salam

FIXATION OF SALE PRICE

Total Export L/C Value = 40,000

No. of Unit 100 Pc

Say,

Export Price Per Unit = Tk. 400

100 x 400 = Tk. 40000

 Bai-Salam

FIXATION OF PURCHASE PRICE

1200  Sale (Export) Price Per Unit

--------------------------------------------------------------
1200 + (Expected Rate of Return  Period in Months)
Say,
Sale (Export) Price Per Unit = Tk. 400
Expected Rate of Return = 7%
Period = 9 months
1200  400 480000
----------------- = ---------- = 380.0475
1200 + (7  9) 1263
 Bai-Salam

FIXATION OF TOTAL PURCHASE PRICE

Number of units to be purchased = 100

Say,

Purchase Price Per Unit = Tk. 380

Tk. 380 ×100 Unit = TK. 38,000

Amount of Investment = Tk. 38000

 Bai-Salam

FIXATION OF PROFIT

Profit = Total Sale Price-Amount of Investment

Say,

Total Sale Price = Tk. 40000

Amount of Investment= Tk. 38000

40000 - 38000 = Tk. 2000

Methods of Installment
Calculation of HPSM
 Method of Rent Calculation

There are mainly 3-mothods of Rent

Calculation in HPSM.
1.Average Method
2.Annuity Method
3.Diminishing Balance Method
 Methods of Rent Calculation

(Average Method Without Gestation Period)

Monthly Installment = MP+MR

Where,
MP = Monthly Principal
MR=Monthly Rent
 Methods of Rent Calculation (Average
Method)
Monthly Principal= TP÷ Total Installment
Monthly Rent= TR ÷ Total Installment

Total Rent = (P +Pi)/2 × RR× N

Where,
P = Amount Disbursed
Pi = Principal Installment
RR = Rate of Return
N =Total Period of Investment excluding gestation
period
 Solution (Average Method)
Principal (P) = Tk. 10,00,000
Principal Installment (Pi) = Tk. 10,00,000÷84 = Tk. 11,905

Rate of Return (RR) = 14%

Period of Investment (N) = 7 Years
Total Rent/Profit = [(P + Pi)/2 × RR × N]
= [{(10,00,000 + 11,905)/2 × 14%} × 7]
={10,11,905÷2 × 15%} ×
= 5,05,952.50×14%× 7
= 70,833.35× 7
=4,95,833
Monthly Rent/Profit = 4,95,833÷ 84
= 5902.77
Monthly Installment = Principal + Rent+0
= 11,905+ 5903+0
= Tk.17,808
Monthly Installment (With Gestation Period) =
MP+MR+MPGP
Where,
MP = Monthly Principal
MR=Monthly Rent
MPGP=Monthly Profit on Gestation Period
Profit on Gestation Period (G) = Tk.1,40,000 (i.e. 15% of
Tk.10,00,000)

Monthly Profit on Gestation Period=1,40,000÷84

=1667

Monthly Installment = Principal + Rent+GP

= 11,905+ 5903+1,667
= Tk.19,475
 Calculation of Monthly
Installments (Annuity
Method)
Suppose, an HPSM Investment of
Tk.10,00,000 was allowed to a client
for a period of 7 years and gestation
period of 1 year at 14% RR.

What will be the monthly installment ?

Calculation of Monthly Installments (Annuity
Method)
P. i. (1+i)n
Monthly Installment (A) = __________
(1+i)n-1
Where,
A= Monthly Installment
P=Principal
R(i)=Rate of Return
n= No. of Installment
 P. i. (1+i)n
Monthly Installment (A) = __________
(1+i)n-1
= (10,00,000 ×0.14/12)(1+0.14/12)84
(1+0.14/12)84 – 1
= (10,00,000 ×0.0117)(1+0.0117)84
(1+0.0117)84 – 1
= 11,700 ×(1.0117)84
(1.0117)84 – 1
= 11,700 ×2.6567
2.6567 – 1
= 31,083
1.6567
= 18762
scientific calculator
Any Questions?

46