murabaha part 1
DESCRIPTION
Presentation -1 on basic concept of Murabaha in Islamic BankingTRANSCRIPT
MURABAHA
Presented By Jawaid Iqbal
Prepared by: Br. Ali Abbas Abidi15 Rajub 1429, Saturday July 19, 2008
Al-Sadiq (A.S) Institute of Islamic Banking, Finance & Takaful
Murabaha - Definition
Murabaha is selling a commodity as per the purchasing price with a defined and agreed profit mark-up.
This mark-up may be a percentage of the selling price or a lump sum. This transaction may be concluded either without a prior promise to buy, in which case is called an ordinary Murabaha, or with
a prior promise to buy submitted by a person interested in acquiring goods through the institution, in which case it is called a “banking Murabaha” i.e. Murabaha to the purchase orderer.
Shari’a Standard No. (8) – Murabaha to the purchase Orderer: Accounting and Auditing Organization for Islamic Financial Institutions)
Murabaha Transactions
at the
Asset Side
of Islamic Banks
Asset SideIslamic
BankingLiability Side
Deposits from
Customers
Deposit Bases :Musharika
Mudaraba
Wakala
Ijara
Murabaha
Dimishing Musharika
Musharika
MudarbaMURABAHA
Is always at
Asset side
Murabaha
Mode of Financing
Banking Systems
Similarity
Conventional Banking
(Lending)Islamic Banking
(Murabaha)
Client
Knows
Loan
Client
Knows
Goods
CostInterest % Mark-up %
Allah has permitted Trade and Prohibited RIBA
Islamic Bank &
Conventional Bank
For the Purpose
Of Murabaha & Lending
Lending
Is Changed
with Goods
Interest is
Changed
with
mark up
Parties for Completing Murabaha Contract
As Sale As Mode of Finance
Seller Buyer Client Bank Supplier
Sale on the basis
Of Both
Spot and Deferred Deferred Sales
Morabaha Sale
Spot Deferred
Direct between
Buyer and Seller
Through Bank
Rules covered in
Standard Not covered in
Standard
Not emphasize in
Standard
Bai Mu’ajjal
Parties to
Murabaha Transaction
Bank Client Supplier
Parties for Murabaha Trasaction
Client Request to Bank
Bank Purchases Goods from Supplier
Bank Sells Goods to Client
No Agency Relationship between Client and Bank
Bank Supplier
Parties before Murabaha Transaction
(1) Payment
(2) Sales Goods
Bank Client Supplier
Parties for Murabaha Transaction
(1) Sales Goods
(2) Pays in Defer
Payment basis
No
Relation
Agency Relationship
Between
Client and Bank
Bank Client Supplier
(1)Make Client
his agent
(2) Makes bank as his
Principal
(3)Purchases
Goods
(5) Through Offer
and acceptance
Make Murabaha
(7) Pays on
defer basis
(6)Consume Goods
When Bank makes his client as agent
(4)Pay cost
Of Goods
Different Contracts
to Conclude
Murabaha
Contract
FirstActual Purchase
Bank and Supplier
SecondMurabaha Contract
Bank and Client
When Client is not an Agent of Bank
Contract
SecondBank and
Supplier
ThirdMurabaha Contract
Bank and Client
FirstBank And Client
Contract of
AgencyAlthough
Client Buys
But
Contract between Bank and Supplier
When Client is an Agent of bank
Contract of Murabaha mean
Offer
From ClientAcceptance from
Bank
OR
Offer
From BankAcceptance from
Client
1….First Promisor and Promisee
2….Agent and Principal (In special Case)
3….Buyer and Seller
4….Last Debtor and Creditor
Relationship
Between
Client and Bank
Relationship between Bank and Client
Before
MurabahaAfter Murabaha
Bank
PromiseeClient
Promisor
Bank
Creditor
Client
Debtor
At the Time of
Murabaha
Bank
Seller
Client
Buyer
Before
MurabahaClient
Agent
Bank
Principal
Before
Murabaha
Bank
PromiseeClient
Promisor
When no Agency When Agency contract
Between Client and bank
Bank
PromiseeClient
PromisorBank
Principal
Client
Agent
At the Time of Murabaha:
When Goods are with the Bank
Bank
SellerClient
Buyer
Owns and Posses
GoodsSales
At the Time of Murabaha: When Goods are with the Client
Bank-Seller Client-Buyer
Owns Goods
Client Possess Goods
On Behalf of Bank
Bank has
Constructive
Possession over
Goods
Bank Sales
Constructive Possession of bank
After Murabaha
Bank
Creditor
(Receiver of Amount)
Client
Debtor
(Payer of Amount)
Pays
Receives
Appointment
of
Client As Agent
When Bank appoints Client as Agent
Goods are of
Special in Nature
Bank unable to approach
To Supplier
Remember it is least preferred to appoint Client on Behalf
Of Bank to purchase the Goods
Subject Matter
and
Consideration
Subject Matter Consideration
Contract of Murabaha
Existing
Goods Cost Markup+
Fixed Asset and
Consumables are allowed
Commodity under Morabaha
Include Exclude
Gold
Silver
Same Currency
Expenses of Client
All goods except
It is a view those who accept Currency alternate to Gold
Cost
Hidden
Murabaha Tawlliyah Wazia
Disclose to Customer
Musamawa
Profit on Sale
Hidden
Murabaha
Disclose to Customer
Musamawa
No Profit in Wazia
And Tawlia
Goods can only be sold on the price mentioned herein
Musamawah Murabaha Tawlliyah Wazia
Price Break Up
Murabaha Tawlliyah WaziaMusamawa
Cost +
ProfitCost +
Zero Profit
Cost -
Loss
Cost +
Profit
Buyers Knows
In
Murabaha
In
Tawlliyah
In
Wazia
In
Musamawa
Nothing
about
Cost and
Zero Profit
Cost and
LossCost and
Profit
Cost and Profit
Contract of Sale On
SpotDeferred
Bai Mu’ajjal
If Seller discloses
Cost and Profit to Buyer
It is a
Murabaha
OR
Price
Musamawah Murabaha Tawlliayah Wazia
Deferred SpotBai
Mu’ajjal
Deferment of Price
Musamawah Murabaha Tawlliyah Wazia
Standard no.8
Covers
Murabaha
In Detail
Not Covered in detailed in Standard No. 8
End of Part 1