Islamic Sale of Contract: Murabahah in Islamic Finance System

RUNNING HEAD: ISLAMIC SALE OF CONTRACT
Islamic Sale of Contract
Name of the student
Name of the university
Author Note

1
ISLAMIC SALE OF CONTRACT
Abstract:
The system of Islamic Banking system has emerged, which led to the development of financial
transaction, which is not considered in the books of classics on the system of Islamic finance.
One of the main inventions is Murabhah. As most of the products that are newly introduced
regarding the system of Islamic Finance, where it is referred as the Products of Islamic Finance
or Products of Islamic Banking. There is presence of many arguments that are provided in
against or for the lawfulness of Murabahah under the principle of Islamic Finance. Among all the
criticism against the operation the pronounced deprecation against the suggestion Murabahah is
considered as the closest in the transaction in the matter of conventional banks and therefore it
cannot be lawfully allowed in the Islamic Finance System. This research examines the
suggestions and criticism whether the critic is tenable regarding the matter of Islamic Law and is
provided in the market of finance regarding the matter of Islamic Law and the provided market
of finance is facing many challenges in the contemporary world of Muslims.

2
ISLAMIC SALE OF CONTRACT
Table of Contents
1. Introduction to the Problem......................................................................................................2
2. Research Objective...................................................................................................................4
3. Review of Literature.................................................................................................................5
3.1. Purporse and Operation of Murabahah.............................................................................5
3.2. Principal and Condition Involved in the Transaction of Murabahah:...............................7
3.2.1. Condition for a Valid Sale of Murabahah:....................................................................7
3.2.1.1. Information on the primary price of the parties:........................................................7
3.2.1.2. Information regarding the margin of profit:..............................................................7
3.2.1.3. Fungibility of the original price.................................................................................7
3.2.1.4. The products where the murabahah is traded must not be found to eligible for riba:
8
3.2.1.5. The validity of the initial contract:............................................................................8
3.2.1.6. Main steps in the Transaction of Murabahah:...........................................................8
4. Research Methods....................................................................................................................9
5. Data Analaysis and Critique of the Criticism:..........................................................................9
Conclusion:....................................................................................................................................10
Reference:......................................................................................................................................11

3
ISLAMIC SALE OF CONTRACT
1. Introduction to the Problem
The facility of murabahah is deemed to be same as the conventional financing bank along
with mark-up or the profit rate, which is contemporary with the interest rate. The difference
between the two will be disappeared if proper care is not taken. Shari’ah imposes various
constraints, and some rules and regulations are prescribed so that the facility of murabahah will
be free from riba. There are several conditions that focus on keeping the product free from gharar
that is prohibited is also being prescribed. It has been seen that there is a modern innovation from
the system of Islamic Finance which is known as the product of Islamic Banking, which is
known as Murabahah which is translated as ‘cost-plus-sales’. Murabahah is known as the
backbone of the banking systems of Islam is mainly used for the system of finance regarding the
purchase of the raw materials that consist of the consumer durable, equipment and machinery.
According to this nature it is considered as the form of trust sale in the field of system of Islamic
Finance. Because of the involvement of the trust to the aspiration and operation of an individual
in which the Murabahah can be met. It has embraced widely and the consumer of the Islamic
banks throughout the globe choosing preference all over the product of banking system of
Australia. Under the principle of Islamic Finance the legality of Murabahah is grounded, there is
a placement of reliance for the maximum proof of the Islamic Law and the early practices in the
Muslim generation (Afkar 2015). There are many proofs that are found for giving the
justification, murabahah is not free form the restraint of condemnation and criticism of the jurist
those who are contemporary. The pronouncement of the deprecation for the operation is the main