ED­U­CA­TION/ FAQ on Murabaha

Gulf Times Business - - ISLAMIC FINANCE -

Is it per­mis­si­ble to ap­point a guar­an­tor in a Murabaha sale?

It is per­mis­si­ble to ap­point a guar­an­tor in a Murabaha sale on credit. The guar­an­tor should be pro­vided a let­ter which stip­u­lates that guar­an­tees should not be evoked ex­cept upon de­fault of the party. The bank should al­ways ex­er­cise pru­dence and cau­tion in evok­ing a guar­an­tee and should con­sider it a last re­sort.

Is it per­mis­si­ble to fi­nance labour cost un­der Murabaha?

It is im­per­mis­si­ble to fi­nance the cost of labour un­der a Murabaha. For such a fi­nanc­ing, other per­mis­si­ble meth­ods such as a Musharakah or a Mu­darabah may be used.

Is it per­mis­si­ble to in­crease one’s profit rate on Murabaha trans­ac­tions when deal­ing with past de­fault­ers?

It is per­mis­si­ble in the Shariah to charge dif­fer­ent profit rates from dif­fer­ent cus­tomers. The profit rate is a mat­ter of mu­tual con­sent be­tween the par­ties and may be de­cided and changed on a case-by-case ba­sis.

Is it per­mis­si­ble to share in the busi­ness prof­its of a client who has been sold goods un­der a Murabaha which are es­sen­tial in run­ning that par­tic­u­lar busi­ness?

It is im­per­mis­si­ble to re­ceive any share of the prof­its of a Murabaha client and it is not per­mis­si­ble to add any such clause in a Murabaha con­tract.

In the case of an item to be sold un­der a Murabaha, is it per­mis­si­ble to is­sue the ti­tle deed in the name of the promis­ing buyer?

It is not per­mis­si­ble to is­sue the ti­tle deed in the name of the promis­ing buyer. The ti­tle deed is proof of own­er­ship and should be in the name of the present owner.

In case goods im­ported in a Murabaha con­tract are de­liv­ered in in­stal­ments, is one Murabaha con­tract suf­fi­cient for the ar­rival of each in­stal­ment?

In such a case, sep­a­rate Murabaha con­tracts should be drafted for each in­stal­ment date.

Is it per­mis­si­ble for the bank to de­fer pay­ment to the seller of the goods un­til such goods have been de­liv­ered to the buyer?

It is per­mis­si­ble for the bank to de­fer pay­ment un­til goods have been re­ceived and ap­proved by the buyer. How­ever, this is con­tin­gent upon the fact that the sale con­tract be­tween the bank and the seller has been con­cluded.

A client ap­proaches a bank to pur­chase goods un­der Murabaha. How­ever, the client has a pre­vi­ous con­tract of pur­chase with the owner of the goods. May such a con­tract be uni­lat­er­ally ter­mi­nated by the client in or­der to pro­ceed with the Murabaha con­tract?

Deal­ing with a client who has a pre­vi­ous con­tract with the owner of the goods de­pends on the na­ture of such a pre­vi­ous con­tract. If the con­tract is a gen­eral agree­ment and does not cover a spe­cific trans­ac­tion, then a Murabaha may be en­tered into. If, how­ever, the con­tract is for a spe­cific trans­ac­tion, then this con­tract should be ter­mi­nated be­fore en­ter­ing into a Murabaha trans­ac­tion. As proof of ter­mi­na­tion, the client should pro­vide the bank writ­ten ev­i­dence in­di­cat­ing that the client and owner of the goods have ter­mi­nated their pre­vi­ous con­tract.

Is it per­mis­si­ble to sell en­dow­ments (Waqf) un­der Murabaha?

It is not per­mis­si­ble to sell en­dow­ments in the Shariah since they are not owned by any spe­cific per­son, and for a sale to be valid a seller must be un­am­bigu­ously iden­ti­fied.

Is it per­mis­si­ble to make ad­vance pay­ments of Murabaha in­stal­ments?

It is per­mis­si­ble for the seller to ac­cept ad­vance pay­ments of Murabaha in­stal­ments. It is fur­ther per­mis­si­ble to re­duce one’s profit in con­sid­er­a­tion of re­ceiv­ing such ad­vance pay­ments; how­ever, this may not be stip­u­lated or im­plied as a con­di­tion.

Is it per­mis­si­ble for a lessor to buy goods from a lessee un­der a Murabaha, with a bank as an in­ter­me­di­ary?

Such a trans­ac­tion is per­mis­si­ble in prin­ci­ple. How­ever, it should be ver­i­fied that the lessee is the ac­tual owner of the goods be­ing sold and that the ac­tual trans­fer of goods takes place. Due to the sen­si­tiv­ity of such a trans­ac­tion, it is strongly rec­om­mended that a Shariah opin­ion be sought on the ac­tual con­tract in ques­tion.

Is it per­mis­si­ble to sell un­der Murabaha goods that were bought for one’s own use?

It is per­mis­si­ble to sell such goods un­der a Murabaha. The in­ten­tion at the time of pur­chase does not af­fect the va­lid­ity of the Murabaha con­tract.

What fac­tors should the seller con­sider in de­ter­min­ing the price of a Murabaha con­tract?

The Murabaha price is mu­tu­ally agreed upon be­tween the par­ties to the con­tract. The seller should hon­estly state the cost in­curred in pur­chas­ing and ac­quir­ing the goods and should pro­pose a fair profit mar­gin that the buyer agrees to.

Is it per­mis­si­ble to sell goods un­der Murabaha that are im­per­mis­si­ble in Shariah?

It is not per­mis­si­ble to trade in any­thing that is im­per­mis­si­ble in Shariah’ be it un­der Murabaha or any other mode.

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