What is meant by murabaha?

What Is Murabaha? Murabaha, also referred to as cost-plus financing, is an Islamic financing structure in which the seller and buyer agree to the cost and markup of an asset. As such, murabaha is not an interest-bearing loan (qardh ribawi) but is an acceptable form of credit sale under Islamic law.

What is murabaha and Musawamah?

Musawamah (bargaining sale) is a type of sale (ba’i or bay’) in which the cost price is not disclosed or referred to. On the other hand, murabahah (cost-plus sale) is a special type of the so-called trust sales (buyu’ al-amanah).

What is Gharar in Islamic finance?

The Arabic word Gharar is a fairly broad concept that literally means deceit, risk, fraud, uncertainty or hazard that might lead to destruction or loss. Examples of Gharar fahish in contracts are plenty as shown by the Al- Hadith and normally is associated with the reasons why Gharar sales are prohibited.

What is Gharar in Islamic banking?

The word gharar means uncertainty, hazards, or risk. In Islamic finance, gharar is prohibited because it runs counter to the notion of certainty and openness in business dealings. Gharar can arise when the claim of ownership is unclear or suspicious.

Why is Kafalah important?

It is found that Islamic banks in Malaysia uses Kafalah as a primary contract to structure products and it also used as a secondary contract that is combined with other contracts to secure the future payments owed by the customer to the bank.

What is gharar and examples?

The word gharar means uncertainty, hazards, or risk. Examples of gharar in modern finance include futures and options contracts, which have dates of delivery in the future.

What is mudarabah contract?

Mudarabah or “Sharing the profit and loss with venture capital”, is a partnership or trust financing contract (similar to western equivalent of General and Limited Partnership) where one partner (rabb-ul-mal or “silent partner”/financier), gives money to another (mudarib or “working partner”) for investing in a …