ISLAMI BANK BANGLADESH LIMITED
HEAD OFFICE, DHAKA.
PROCEDURE FOR INVESTMENT UNDER BAI-MURABAHA MODE
MEANING AND DEFINITION
The terms "Bai-Murabaha" have been derived from Arabic words ﺢﻳﺑ and ﺢﺑﺭ (Bai and Ribhun). The word ﺢﻳﺑ means purchase and sale and the word ﺢﺑﺭ means an agreed upon profit. ﺢﺑﺍﺭﻣﺍ ﺢﻳﺑ " Bai-Murabaha" means sale on agreed upon profit.
Bai-Murabaha may be defined as a contract between a Buyer and a Seller under which the Seller sells certain specific goods permissible under Islamic Shariah and the Law of the land to the Buyer at a cost plus agreed profit payable in cash or on any fixed future date in lump sum or by instalments. The profit marked-up may be fixed in lump sum or in percentage of the cost price of the goods.
TYPES OF MURABAHA.
In respect of dealing parties Bai-Murabaha may be of two types.
If there are only two parties, the seller and the buyer, where the seller as an ordinary trader purchases the goods from the market without depending on any order and promise to buy the same from him and sells those to a buyer for cost plus profit, then the sale is called Ordinary Bai-Murabaha.
Bai-Murabaha on Order and Promise
If there are three parties, the buyer, the seller and the Bank as an intermediary trader between the buyer and the seller, where the Bank upon receipt of order from the buyer with specification and a prior outstanding promise to buy the goods from the Bank, purchases the ordered goods and sells those to the ordering buyer at a cost plus agreed profit, the sale is called "Bai-Murabaha on Order or Promise", generally known as Murabaha.
This Murabaha upon order and promise is generally used by the Islami Banks, which undertake the purchase of commodities according to the specification requested by the Clients and sale on Bai-Murabaha to the one who ordered for the goods and promised to buy those for its cost price plus a marked-up profit agreed upon previously by the two parties, the Bank and the Client.
In this Bank, Bai-Murabaha is treated as a contract between the Bank and the Client under which the Bank purchases the specified goods as per order and specification of the Client and sells those to the ordering Client at a cost plus agreed upon profit payable within a fixed future date in lump sum or by fixed instalments.
Thus it is a sale of goods on profit by which ownership of the goods is transferred by the Bank to the Client but the payment of the sale price (cost plus profit) by the Client is deferred for a fixed period.
It may be noted here that, in case of Bai-Muajjal and Bai-Murabaha, Islamic Bank is a financier to the Client not in the sense that the Bank finances the purchase of goods by the Client, rather it is a financier by deferring the receipt of sale price of the goods sold by the Bank to the Client.
If the Bank does not purchase the goods or does not make any purchase agreement with seller, but only makes payment of any goods directly purchased and received by the Client from the seller under Bai-Muajjal/Bai-Murabaha Agreement, that will be a remittance of the amount on behalf of the Client, which shall be nothing but a loan to him and any profit on this amount shall be nothing but Interest (Riba).
Therefore, purchase of goods by the Bank should be for and on behalf of the Bank and the payment of price of goods by the Bank must be made for and on behalf of the Bank. If in any way the payment of price of goods is turned into a payment for and on behalf of the Client or it is paid to the Client any profit on it will be Riba.
It is permissible for the Client to offer an order to purchase by the Bank particular goods deciding its specification and committing himself to buy the same from the...
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