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The Principles and Practices of Shariah in Islamic Finance - page 19 / 49

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23. Any mutually agreed benchmark, including but not limited to conventional financial benchmark such as the Base Lending Rate (BLR), may be used to determine the mark-up in the Murabahah contract.

Illustration 2: BLR as Benchmark for Determining Murabahah Mark-up

XYZ Bank is an IFI operating in a dual banking system where conventional banking offers similar financial services to the same pool of customers. The BLR of the industry is quoted at 3%. The IFI assesses the expectations of investment and non-investment account holders which are found to be 3.5% in lieu of BLR. In this respect, the pricing of Murabahah financing may take into consideration the BLR as the base rate, as a form of competitive price determination.

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