Al-Murabahah is a “cost-plus” sale contract. It is a facility granted to customers for financing their short term working capital requirement by way of lump sum deferred payment cost plus profit.
Benefits
Advance made by the Bank on behalf of buyer to pay the seller;
Buyer pays the Bank on deferred payment term.
Features
The cost must be revealed;
The price and tenure of the lump-sum deferred payment must be agreed upon by the Bank and the customer;
The Bank appoints customer as an agent (Al-Wakalah) to purchase on its behalf;
Marginal deposit may be imposed;
Trade transactions for sight (D/P) only are allowed;
Financing for item of saleable value; e.g. purchase of stock and inventories, spares and replacements, semi-finished goods and raw materials.