FIN624 Islamic Modes OF Financing Assignments No 2 Ideal Solution Semester Fall 2014

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FIN624 Islamic Modes OF Financing Assignments No 2 Ideal Solution Semester Fall 2014



ASSIGNMENT QUESTION



What do you know about Murabaha? How can you
differentiate the Murabaha and Traditional Sale?
Briefly explain the general procedure adopted by
Islamic banks/financial institutions for Murabaha
transactions.


IMPORTANT:
Grace period of extra 24 hours after the due date is usually available to
overcome uploading difficulties. This extra time should only be used to
meet the emergencies and above mentioned due dates should always be
treated as final to avoid any inconvenience.
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An Islamic financing structure, where an intermediary buys a property with free and clear title to it. The intermediary and prospective buyer then agree upon a sale price (including an agreed upon profit for the intermediary) that can be made through a series of installments, or as a lump sum payment.

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Murabaha is not an interest-bearing loan, which is considered riba (or excess). Murabaha is an acceptable form of credit sale under Sharia (Islamic religious law). Similar in structure to a rent to own arrangement, the intermediary retains ownership of the property until the loan is paid in full.
It is important to note that to prevent riba, the intermediary cannot be compensated in addition to the agreed upon terms of the contract. For this reason, if the buyer is late on their payments, the intermediary cannot charge any late penalties.