Islamic Contract – Bay’ al-Murābahah: Meaning of “Absorbing the Takaful Cost”

​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 takaful cost may either be borne by the seller (Islamic bank); or
• paid directly by the purchaser (customer), depending on the contractual arrangement.

When BNM states that:
“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

Explanation
Here:

• the bank initially bears (“absorbs”) the takaful cost of RM5,000;
• the bank includes it as part of the acquisition cost.

Thus:
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

Arrangement
Before the murābahah contract:

• the customer separately agrees to pay the RM3,000 takaful contribution directly.

Therefore:

• the bank’s acquisition cost remains RM100,000;
• the murābahah selling price becomes RM115,000 only.

The customer separately pays:

• RM3,000 takaful contribution; and
• RM115,000 murābahah price.

Total customer payment

• Murābahah price = RM115,000
• Separate takaful payment = RM3,000
• Total overall payment = RM118,000

Key Point
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.

Purchaser Absorbs Takaful Cost

• Customer pays takaful separately.
• Takaful excluded from murābahah cost.
• Murābahah selling price becomes lower.