Islamic Contract - Bay Al Murabahah

​Islamic Contract
Q1: What is Bay' al-Murābahah (Markup Sale)?
Bay' al-Murābahah, commonly known as murābahah, is a type of Islamic sale contract where the seller discloses both the original acquisition cost of an item and the profit markup added before selling it to the buyer. The term murābahah originates from the Arabic word ribh, which means profit. This contract may be conducted either on a cash basis or through deferred payment arrangements.

Q2: What is the main characteristic of a murābahah contract?
The distinguishing feature of a murābahah contract is transparency and trust. The seller must clearly inform the buyer about the actual cost incurred in obtaining the asset and the amount of profit being charged. This disclosure differentiates murābahah from ordinary sale contracts where the original cost is usually not revealed.

Q3: How is murābahah different from musāwamah?
Musāwamah is a sale contract in which the selling price is negotiated freely between the buyer and seller without disclosing the original cost price of the item. In contrast, murābahah requires the seller to disclose both the acquisition cost and the profit margin to the purchaser.
Q4: What is bay' al-wadī‘ah and how does it differ from murābahah?
Bay' al-wadī‘ah is a type of sale where goods are sold below their original purchase price, meaning the seller incurs a loss or gives a discount. Similar to murābahah, the seller must disclose the original cost of the goods. However, unlike murābahah, no profit is added in wadī‘ah.
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Q5: What is bay' al-tawliyah?
Bay' al-tawliyah refers to a sale where the seller transfers the asset to the buyer at exactly the same cost price without adding any profit or discount. It is therefore different from murābahah, which includes a disclosed profit margin.