Murabahah (Cost Plus)

Murabaha offers customers the convenience of acquiring financing for business use and repaying the Bank over a period of time consistent with their sources of income. Under a Murabaha transaction, the Bank provides the customer with the finance needed to purchase an asset, either locally or from abroad, for the business. The customer, in coordination with the bank, negotiates the purchase price of the asset with the seller, the bank purchases the asset from the seller then sells it to the customer after adding a pre-agreed upon profit margin.

A Murabaha L/C enables a business to buy goods, commodities, machinery, or equipment from abroad. The customer submits a request to the bank and accompanies it with a supplier quotation. The bank issues an import LC to the supplier naming itself as the buyer. Upon arrival of goods, the bank sells the goods to the customer at a predetermined selling price based on cost plus a pre-agreed profit margin.