Murabaha Financing


- Murarbaha Financing : Some Controversial Issues

In this article by Beebee Salma Sairally, Murabahah Financing : Some
Controversial Issues, we will discuss the term Murarbaha, it’s meaning
and what are the issues faced on the different basis, controversially. Riba
is prohibited in Islam, Ribah is known as the interest rate on the value,
just like in conventional banking. Islamic banks developed contracts
based on Shariah financing. Among these contracts one of them is known
as Murabaha. Islamic banks uses Murabahah as Mark-up value contract,
and it has been criticized by scholars and public. Although criticisms are
unproven and unjustified. Different banks have different methods to
practices Murabahah due to which most of people doubts and criticize it.
Generally, Banks should make sure to provide doubtless contract on the
basis of shariah.
Murabahah is one of the most used financing contract in Islamic bank due
to its fixed return modes. Most of financing arranged by banks are
murabaha based. Murabahah accounts 70 % of profit of Islamic banks,
while from other financing the profit sharing is 14%. Banks have tried a
lot to explain the banks preference for Murabahah financing, which is
basically a trading technique, trade financing, short time finance and low
risk profit-sharing contract. Lately, extensive use of murabaha gave rise
to criticism of Islamic Banking. Critics claimed that the murabaha
Financing is no different from the interest-based financing in
Conventional Banks, also some criticize it as Banks role is of financial
intermediary but not a trading partner.
In general, this article is an attempt to discuss the main criticisms on
Murabahah on current basis of Islamic banking. Also any violation


against Shariah is highlighted and laws by jurists and the legality of
Islamic product will be defined.
- Murabahah’s origins and as a bankable mode:

Murabahah is derived from the Arabic word RIBH which means...