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Financing With Murabaha
What’s the typical way of financing using Murabaha?
A client approaches a bank to enter into a Murabaha agreement to purchase an asset. The bank agrees and promises to sell the asset at its list price and an additional profit. The buyer in turn promises to make installment payments. The bank purchases the asset from a vendor and then sells the asset with the agreed profit in installments (or lump-sum in future).

It is imperative that the bank first own the asset before selling to the client. Sometimes clients make the mistake of approaching the bank with an invoice of an asset after the client has already purchased, which would preclude a Murabaha.

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