LAW

Published on
Islamic Contract Law – How Banks Try to Ensure Real Risk in Murābaḥah

1. Separating the Stages Properly
  • Banks try to clearly separate:
    1. Promise stage (waʿd)
    2. Purchase by bank
    3. Sale to customer
👉 Important:
  • Customer’s promise is:
    • Not the same as a binding sale


Why this helps
  • Bank is not guaranteed profit
  • There is a real possibility:
    • Customer backs out
👉 Bank may be stuck with the asset


Example
  • Customer promises to buy a house
  • Bank purchases the house
  • Customer withdraws
👉 Bank must:
  • Sell to someone else
  • Possibly at a loss
✅ This creates real market risk


2. Ensuring Real Ownership (Qabd)
  • Bank must:
    • Take actual or constructive possession
👉 Not just paper ownership


Example
  • Bank buys a car from supplier
  • Car is registered under bank
  • Bank has control before selling
👉 If damaged during this period:
  • Bank bears loss
✅ Real ownership = real risk


3. Avoiding Instant Back-to-Back Transactions
  • Instead of:
    • Immediate resale
  • Banks may:
    • Hold asset briefly
    • Accept some exposure


Example
  • Bank purchases equipment
  • Keeps ownership for a period
  • Then sells to customer
👉 During that time:
  • Price may change
  • Asset may be damaged
✅ Bank bears time-based risk


4. Limiting Risk Transfer Clauses
  • Avoid clauses that:
    • Shift all risks to customer
👉 Risk must follow:
  • Ownership principle


Example
  • Correct approach
    • Bank bears:
      • Ownership risk
    • Customer bears:
      • Usage risk after purchase
 
  • Problematic approach
    • Customer bears all risk from beginning ❌


5. Using Takaful (Islamic Insurance)
  • Bank may insure asset via:
    • Takaful
👉 Important:
  • Even if insured:
    • Risk still exists
    • Insurance just manages, not removes risk


6. Strengthening Shariah Governance
  • Banks use:
    • Shariah advisory boards
👉 To ensure:
  • Transactions are not:
    • Mere legal tricks (ḥiyal)


7. Moving Towards Alternative Contracts
  • Some banks reduce reliance on murābaḥah
  • Use:
    • Partnership (mushārakah)
    • Leasing (ijārah)
👉 These involve:
  • More genuine risk-sharing


Final Insight
  • Banks are trying to shift from:
    • ❌ “Risk-free murābaḥah”
  • To:
    • ✅ “Risk-bearing murābaḥah”


One-Line Understanding
  • True murābaḥah requires:
    👉 Real ownership + real exposure to loss before profit​
Picture
0 Comments

Author

Learn the fact about law