Meezan Bank - Islamic Trade Finance Murabaha: The Bankers...

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Islamic Trade Finance Murabaha: The Bankers’ Perspective Saleem Khan
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Islam prohibits charging fixed interest on money, but permits charging  fixed profit on sale of goods. This clears a common misconception that  charging fixed profit is haram. Islamic  banks  therefore  use  a  sale-based  transaction  (Murabaha)  instead of a term loan for financing purchase of assets by their clients,  especially for working capital requirements Over 60% of all business volume of Islamic banks comprises of  Murabaha transactions Murabaha
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Murabaha is a particular kind of sale Where  the  transaction  is  done  on  a  “cost  plus profit”  basis       i.e.  the  seller discloses the cost to the buyer and adds a certain profit to it to  arrive at the final selling price The distinguishing feature of Murabaha from ordinary sale is - The seller discloses the cost to the buyer - And a known profit is added  Murabaha
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Murabaha is simply a sale transaction Which  is  being  used  by  Islamic  Financial  institutions  as  a  mode  of  financing by routing the transaction through Bai Muajjal. Murabaha
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As per the rules of Shariah the seller cannot sell the goods unless they  come into his ownership.  However, since goods are to be purchased from the market, they need to  be identified and purchased. 
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This note was uploaded on 10/26/2011 for the course ECONOMICS 105 taught by Professor Ak during the Spring '11 term at Punjab Engineering College.

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Meezan Bank - Islamic Trade Finance Murabaha: The Bankers...

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