Musawamah is similar to Murabaha financing. It offers the customer the convenience of acquiring assets when needed and paying the purchase price plus profits in installments over a period of time.
In a Musawamah transaction, the customer requests the bank to purchase certain assets or commodities from a third party. The price is unknown to the customer, and upon acquiring the commodity, the bank adds its profit amount and offers to sell it to the customer, who has the right to accept, refuse, or negotiate the price. If accepted, the customer repays the total amount in agreed installments. Musawamah is usually provided to finance local purchases including vehicles, real estate, home appliances, machinery and equipment.