What is the historical background of this contract?
Was it practised in the early period of Islam?
Why or Why not?
What are the real Shari'ah objections (if any) regarding this contract?
Why has it become The Contract in Islamic Finance industry?
Murabahah is an Islamic contract by defination and principles, however the application and manipulation (a so called financial engineering) rendering a contract to be questionable and to some extend has been banned by some scholars.
You can go through the articles
Contractual Forms in Islamic Finance Law and
Islamic Inv. Co. of the Gulf (Bahamas) Ltd. v.
Symphony Gems N.V. & Ors.: A First
Impression of Islamic Finance
Islamic Economics and Finance: A European Perspective
Financing : Commodity Murabaha & Tawarruq
Hi Md,
Some people have raised questions concerning the lawfulness of Murabahah sales on credit for a term because these involve issues that resemble interest.
No. it is not an ideal Islamic finance contract and it must be avoided for details please read
Usmani, M. T. (2012). An introduction to Islamic Finance. Karachi, Pakistan: Quranic Studies Publishers Karachi Pakistan.
Murabahah can be truly Islamic finance contract if the IFI is allowed to have inventory of goods to be sold.
Islamic finance contracts may have some practical commercial flaws which impede perfect implemention. I think we can justify this based on umum balwa, no?
acquisition cost is mentiond nothing more remaining you are sensible.
!
In my opinion the compliance status of Murabaha contract depends on many parties. The parties involve in it and their intentions. If we approach the contract from pure sale and purchase base then there is nothing wrong with Murabaha like for example cost plus or rent to own the commodity. On the other hand if the intentions of either party in the contract is not clear than obviously its compliance status can be questioned.
Murabaha is the simplest transaction used in Islamic finance. Its sale on the profit that is mutually agreed by the parties involved. The client may set his request to the bank to leverage certain services or goods for him and in return, the bank provides a definite profit to the client over the cost of goods or services
Islamic banks are unique in their use of many types of financing, including Murabaha, Musharaka, Mudaraba, Istisna'a and Hijra. In practice Murabaha is the most important and most prevalent form, with more than 90% of the total investment of Islamic banks!
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