[Related to Financial Management; ACCA paper F9]
[In light of "Shariah Opinions on Murabaha" published by AlBaraka Banking Group]
Islamic Banking has now been included in the Financial Management syllabus by ACCA. There are a range of Islamic Sources of Finance to be studied such as Murabaha, Sukuk, Mudaraba, Musharaka and Ijara. In simplest terms, they all are sources of finance within Islamic Banking model.
is a form of trade credit or loan. The key distinction between a murabah and a loan is that with a murabaha, the bank will take actual constructive or physical ownership of the asset. The asset is then sold out to the borrower or buyer for a profit. They are allowed to pay in installment.
Murabaha is one of the modes used by Islamic banks to promote riba(interest)-free transactions.
In Quran, riba (literally, excess) is forbidden.
2:275 Allah has permitted trade and has forbidden Riba
A particular Ahadith (quote by Prophet Muhammad (pbuh) serves well in understanding of the nature of transaction that is particularly undesirable in Islam:
Narrated Abu: We used to be given mixed dates (from the booty) and used to sell (barter) two Sas of those dates) for one Sa (of good dates). The Prophet[Peace be upon him] said (to us), “No (bartering of) two Sas for one Sa nor two Dirhams for one Dirham is permissible”, (as that is riba proper).
Features of Murabaha:
1. Murabaha finance is not a loan given on interest, it is a sale of Asset(s) for cash/deferred price.
The customer approaches Bank (Vendor) and identifies Asset(s) and collects relevant information including cost and profit.
Bank sells Asset(s) to the Customer, transfer risk and ownership to the Customer at certain Murabaha Price.
Customer pays Murabaha Price in lump sum or in installments on agreed dates.
Sharia responses to basic Murabaha Procedures -
Question 1:
Please provide Shariah opinion in case it is stipulated that assets which are subject matter of Murabaha transaction should be known and identified.
Answer:
According to Shariah principles and in case of Murabaha sale the original price of the good and all costs incurred by the original buyer to obtain should be clear and known to the buyer in Murabaha transaction and therefore scholars define the sale of Murabaha as the sale of commodity with its current costs plus an agreed upon profit. Hence we believe that all Murabaha sale information should be clarified in all sale documents placed in the file of each contract. [Source: Fatwas of Shariah board, Faisal Islamic Bank, Egypt, Fatwa No. 16]
In a nutshell: The commodity should be sold at its current cost + agreed upon profit and NO interest.
References:
Wikipedia.org; Shariah Opinions (Fatawa) on Murabaha by Albaraka Banking Group
Shining_soul
/ August 18, 2011Interest is also the same a deffered price difference from Original cost price…
So either you call it profit, the concept still remains the same.
Its just like one is dodging himself by changing the name because if you see honestly, the concept in broader terms still the same as it is applied in Interest based transactions.
verda.khan
/ November 20, 2011Then would you call every profit interest?
It has to be appreciated that the bank actually takes ownership of the asset and trades it allowing for instalments. This doesn’t seem to be Riba. Of course, one needs to study all fatwas in detail, then.
I do have Murabaha Fatwa book by IDB but I’ve never read it all.