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Istisnaa
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Murabahah
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Murabahah

This concept refers to the sale of goods at a price, which includes a profit margin agreed to by both parties. The purchase and selling price, other

costs, and the profit margin must be clearly stated at the time of the sale agreement.

The bank is compensated for the time value of its money in the form of the profit margin. This is a fixed-income loan for the purchase of a real asset
(such as real estate or a vehicle), with a fixed rate of profit determined by the profit margin.

The bank is not compensated for the time value of money outside of the contracted term (i.e., the bank cannot charge additional profit on late
payments); however, the asset remains as a mortgage with the bank until the Murabaha is paid in full.

There are three parties involved to it. The seller, the buyer and the bank as an intermediary trader between the buyer and the seller. The bank
here does not purchase unless the buyer specifies his desire and a prior outstanding promise to purchase.

The practical steps of the Murabaha sale

The purchaser determines his needs

The purchaser: Determines the specifications of the commodity he wants and requests the seller to determine the price.

The seller: Sends a quotation valid for a certain period.
 

Signing a promise to purchase agreement

The purchaser: Promises to buy the commodity from the bank on Murabaha sale for the cost of the commodity plus the agreed upon
profit.

The bank: Studies the request and determines the condition and securities for approval.

The first sale contract

The bank: notifies the purchaser of its approval to purchase the commodity. The bank may pay the price immediately or as per the
agreement.

The seller: Expresses his approval to the sale and sends the invoice

Delivery and receipt of the commodity

The bank: authorizes the beneficiary to receive the commodity.

The seller: sends the commodity to the place of delivery agreed upon.

The purchaser: undertakes the receipt of the commodity in his capacity as legal representative and notifies the bank of the execution
of the proxy.

The Murabaha sale contract

The two parties (the bank and the purchaser) sign the Murabaha sale contract according to the agreement of the promise to purchase.


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