EDUCATION/ FAQ on Murabaha

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.