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Financing Goods Murabaha
Convenient Shari’ah compliant financing solutions for goods
Goods Murabaha is a financing solution for the purchase and sale of goods. The Bank purchases the goods, the subject of the Murabaha, and after possessing and owning the goods the Bank sells them to the Customer with an agreed mark-up either in percentage or in a lump sum and with a deferred payment condition.
The client financing the goods makes payment on a convenient and agreed schedule of payments, enabling them to better manage their cash flow. Absolute transparency: the cost price and margin of the Bank are clearly described in the Murabaha agreement.
How it works?
The client selects the product and the supplier.
The client applies to the Bank, providing all information about the goods, the chosen supplier and submits a price quotation to the Bank from the supplier.
The Bank purchases the Goods from the Supplier with immediate delivery. The ownership and risks associated with the goods are transferred to the Bank as the owner of the goods.
The Bank and the client enter into a Sale and Purchase agreement (Goods/ Corporate Murabaha Agreement) for the selling of the goods to the client. The price of the goods consists of the Bank's cost price and profit margin.
After signing the Murabaha agreement and delivery of the goods to the client, the goods will be owned by the client. The client pays the deferred Murabaha Sale Price payments to the Bank in installments according to the agreed payment schedule.
Financing criteria
Any sector of the economy is financed, except for tobacco and alcohol production, gambling, the production of weapons and ammunition, and other industries that do not comply with the principles and rules of the Shari’ah;
The company must be operational for at least three years. Stand-alone beginning projects are not financed, except for projects involving state and quasi-state structures;
The project owner must contribute at least 20% of the cost of the investment project;
The company should not have arrears in servicing banks;
Finance terms: up to seven (7) years, depending on the type of project and the specifics of the industry;
Financed business should have been profitable within the last three (3) years.
Shari’ah Complaint
The Client cannot sell the goods to the Bank and also the Bank will not buy goods from the Client and sell back the same to the Client. The supplier must be a third party.
Goods cannot be gold, silver and currency.
The goods must be purchased and owned by the Bank before the conclusion of the Murabaha agreement between the Bank and the Client.
As the Murabaha is a trust sale, the Bank is obliged to disclose to the client the cost price of goods, all associated expense related to the purchasing of goods and its mark-up.
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