Islamic Contract – Bay’ al-Murābahah: Promise by the Purchase Orderer

​Islamic Contract – Bay’ al-Murābahah: Promise by the Purchase Orderer
Q1: What is meant by the promise of the purchase orderer in murābahah?
Answer:
In Murābahah to the Purchase Orderer (MPO), the purchase orderer (customer) usually gives a promise (wa‘d) to purchase the asset after the seller or Islamic bank acquires it.
This promise is important because:

• the Islamic bank purchases the asset based on the customer’s request; and
• the promise helps reduce the bank’s ownership and market risks.

Q2: What is the AAOIFI position regarding the customer’s promise?
Answer:
According to AAOIFI Shariah Standard No. 8 (Para 2/3/3):

• the promise may either:
  • be binding; or
  • include an option to cancel.

This means AAOIFI provides flexibility regarding whether the customer must compulsorily complete the purchase.
The approach depends on:

• the agreement between the parties; and
• the structure adopted by the Islamic financial institution.

Q3: What is the BNM position regarding the customer’s promise?
Answer:
According to the Bank Negara Malaysia (BNM) Policy Document on Murābahah (Para 15.2):

• the promise becomes binding once the seller or Islamic bank takes action to acquire the asset.

This means:

• after the bank incurs costs or purchases the asset based on the customer’s undertaking,
• the customer can no longer freely withdraw from the promise without consequences.

This rule protects the Islamic bank from financial loss after relying on the customer’s commitment.


Comparison Notes: AAOIFI vs BNM on Promise by the Purchase Orderer
AAOIFI Position

• Promise may be:
  • binding; or
  • non-binding with cancellation option.
• Greater contractual flexibility.
• Focuses on preserving voluntary consent.

BNM Position

• Promise becomes binding once the bank acts to acquire the asset.
• Protects the bank from ownership and commercial risks.
• Provides stronger operational certainty in Islamic banking practice.

Case Study: Promise to Purchase Machinery
A company requests an Islamic bank to purchase machinery worth RM500,000 through a murābahah arrangement.
The company signs a promise to purchase the machinery after the bank acquires it.
The bank then:

1. purchases the machinery from the supplier; and
2. incurs transportation and documentation costs.

Later, the company attempts to cancel the transaction.
Under AAOIFI

• If the promise was structured as non-binding with cancellation rights, cancellation may be possible depending on the agreement.
• If the promise was binding, the customer may be required to honour the undertaking.

Under BNM

• Once the bank acted to acquire the machinery, the promise became binding.
• The customer may be required to proceed with the purchase or compensate the bank for losses suffered.

Analysis
The difference reflects:

• AAOIFI’s more flexible contractual approach; and
• BNM’s stronger protection of Islamic banks as financial intermediaries in murābahah financing operations.