Ethica Institute of Islamic Finance™

What are the rulings related to the purchase requisition in a Murabaha?

A client sumbits the purchase requisition when the financial institution approves a credit limit for a Murabaha. A bank may refuse to execute a Murabaha for an asset that is not Shariah-compliant or is against the bank’s policy to promote in the market. The client’s request and unilateral promise to purchase the Murabaha asset may be placed in combined or separate documents. If separate documents are created, the unilateral promise to purchase is made after the master Murabaha facility agreement is signed. The purchase requisition is evaluated as follows: 1. The bank must first ensure that the commodity is Shariah complaint and sellable in the market. 2. If the bank is to purchase the goods of the Murabaha, then it must ensure that the client has not already made the purchase from the supplier. 3. If he has, the deal between the supplier and client must be cancelled. 4. The supplier must not be the client himself but must be a third party. If the supplier is the client, the transaction will be a buy back which is prohibited. It is impermissible to execute a Murabaha if: • The client is the supplier’s agent; • The supplier is the client’s agent; or They are both substantial shareholders in the transacting company.

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