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Goods Finance

Customers can purchase commodities through the various Islamic goods finance arrangements offered at Islamic banks. Two structures implemented to facilitate this type of financing in accordance with the Shariah guidelines are either a mark-up sale or a sale on negotiation.

Types of Contracts

MARKUP-SALE (MURABAHA)

It refers to the sale of a commodity at a disclosed cost-plus-profit price. The markup can either be a percentage of the selling price or a lump sum amount and the sale price cannot be changed.

The contract can be concluded without a prior promise (Ordinary Murabaha) or with a prior promise (Murabaha to Purchase Orderor/Banking Murabaha).


SALE ON NEGOTIATION (MUSAWAMA)

It refers to the sale of a commodity at the cost-plus-profit price. Under Murabaha, the seler discloses the purchase price and the profit markup. However, under Musawama, the sale is concluded after negotiations on the sale price and not referring to the cost and profit of the commodity.

Banks

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