- Published on
Islamic Contract – Bay’ al-Murābahah: Meaning of “Absorbing the Takaful Cost”
Q1: What does “absorbing the takaful cost” mean in murābahah?
Answer:
“Absorbing the takaful cost” means bearing or paying the takaful contribution associated with the asset.
In the context of murābahah:
“the purchaser may absorb the takaful cost before entering into the murābahah contract,”
it means:
Example 1: Seller Absorbs the Takaful Cost (AAOIFI Approach)
An Islamic bank purchases machinery for murābahah financing.
Figures
Here:
RM200,000 + RM5,000 = RM205,000 acquisition cost
The customer then pays:
RM225,000 = RM205,000 cost + RM20,000 profit
Key Point
The takaful cost becomes part of the murābahah selling price because the bank paid it first.
Example 2: Purchaser Absorbs the Takaful Cost (BNM Approach)
A customer applies for Islamic vehicle financing.
Figures
Before the murābahah contract:
The purchaser “absorbs” the takaful cost because:
Simple Difference Between the Two Approaches
Seller Absorbs Takaful Cost
Q1: What does “absorbing the takaful cost” mean in murābahah?
Answer:
“Absorbing the takaful cost” means bearing or paying the takaful contribution associated with the asset.
In the context of murābahah:
- the takaful cost may either be borne by the seller (Islamic bank); or
- paid directly by the purchaser (customer), depending on the contractual arrangement.
“the purchaser may absorb the takaful cost before entering into the murābahah contract,”
it means:
- the customer agrees to pay the takaful contribution separately before the murābahah sale contract is executed.
Example 1: Seller Absorbs the Takaful Cost (AAOIFI Approach)
An Islamic bank purchases machinery for murābahah financing.
Figures
- Cost of machinery: RM200,000
- Takaful contribution paid by bank: RM5,000
- Total acquisition cost: RM205,000
- Profit margin: RM20,000
- Murābahah selling price: RM225,000
Here:
- the bank initially bears (“absorbs”) the takaful cost of RM5,000;
- the bank includes it as part of the acquisition cost.
RM200,000 + RM5,000 = RM205,000 acquisition cost
The customer then pays:
RM225,000 = RM205,000 cost + RM20,000 profit
Key Point
The takaful cost becomes part of the murābahah selling price because the bank paid it first.
Example 2: Purchaser Absorbs the Takaful Cost (BNM Approach)
A customer applies for Islamic vehicle financing.
Figures
- Vehicle price: RM100,000
- Takaful contribution: RM3,000
- Bank’s profit margin: RM15,000
- Murābahah selling price: RM115,000
Before the murābahah contract:
- the customer separately agrees to pay the RM3,000 takaful contribution directly.
- the bank’s acquisition cost remains RM100,000;
- the murābahah selling price becomes RM115,000 only.
- RM3,000 takaful contribution; and
- RM115,000 murābahah price.
- Murābahah price = RM115,000
- Separate takaful payment = RM3,000
- Total overall payment = RM118,000
The purchaser “absorbs” the takaful cost because:
- the customer personally bears and pays the takaful expense instead of the bank including it in the murābahah cost.
Simple Difference Between the Two Approaches
Seller Absorbs Takaful Cost
- Bank pays takaful first.
- Takaful included in murābahah cost.
- Customer indirectly pays through instalments.
- Customer pays takaful separately.
- Takaful excluded from murābahah cost.
- Murābahah selling price becomes lower.
0 Comments