7-Morabaha Financing - Essential of Islamic Finance Islamic...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Essential of Islamic Finance Islamic Mode of Financing Morabaha Trade /Commodity Financing By Yousuf Ibnul Hassan Iqra University The word Murabaha is taken from the Arabic word Ribh which means Profit. Originally, Murabaha is a contract of sale in which a commodity is sold on profit. The seller tell the buyer his cost price as well as his profit he is adding to the cost. Modern form of Murabaha has become the single most popular technique of financing all over the world. Morabaha is a financing mode for trading activities on the basis of sale on profit. Technically, it is a contract of sale in which the seller declares his cost and profit. It is an ancient practice which was seen in archives prior to the horizon of Islam. Morabaha practice developed in Islamic financial system with guidance of Islamic Shariah. Morabaha is a financing technique that involves a request by the Morahib (Worker) to the financier (Rab-al-Maal) for the purchase of a certain goods or equipment for him. The financier after the appraisal of the price and cost estimates its profit over the cost which is settled as purchase price in advance. The financier pay on behalf of the Morahib and deliver the goods after taking acceptance of receiving the goods as per request There is a question on the legality on Morabaha financing technique due to its similarity with Interest of Riba. In reality it is wise to settle all the terms in pre-agreed as saying of Prophet Muhammad, May Peace Be Upon Him. You must settle your terms in writing and in agreeing prior to your trading and in trust and for better profitability. How Murabaha mode of finance operates Morahib needs goods and approaches financier to get the required goods or commodities through financing In interest-based system, money is landed on interest to the borrower who would go and buy the required commodity from the market. This option is not available in Morabaha. Money cannot be lent directly to Morahib. Financing against the procurement of goods or commodity requested, directly paid to supplier in accordance to request of Morahib. Morahib approach Rab-al-Maal with his request to acquire goods for trading purpose . The request must be in writing with clear specification of goods required along with the supplier identification and price declare by the supplier....
View Full Document

This note was uploaded on 06/19/2011 for the course ECON 202 taught by Professor Pharuddin during the Summer '11 term at The School of the Art Institute of Chicago.

Page1 / 28

7-Morabaha Financing - Essential of Islamic Finance Islamic...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online