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The Principles and Practices of Shariah in Islamic Finance - page 20 / 49





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24. IFI may set the mark-up in a selling price as a ceiling rate for a periodic rebate in instalment payment which is determined based on a mutually agreed benchmark, specified at the inception of the sale.

Illustration 3: Variation of Mark-up

An IFI provides a Murabahah working capital financing facility to its customers. Customer A requests the IFI to finance the purchase of foodstuff with a shelf life not exceeding 3 months. IFI agrees to purchase from the supplier in cash and sell to the customer on credit, based on Murabahah contract with a mark-up of 10% of the purchase price, to be paid in full at the end of three months. On the other hand, Customer B requests IFI to finance regular purchase of motor vehicle spare parts on demand basis with an inventory turnover that varies between three to six months. IFI agrees to purchase in cash from distributor and sell to the customer on credit, based on the Murabahah contract. The mark-up takes into consideration credit risk factors including customer type, goods and period of financing. The mark-up ranges from 8% to 12% depending on the types of spare parts and terms of financing. The different mark-up may be applied because the Murabahah contract for each customer is separately executed.

  • 25.

    In an agreement where several Murabahah contracts are separately concluded and executed, each Murabahah contract mark-up may be priced differently.

  • 26.

    If several commodities in several Murabahah contracts are sold to the same purchase orderer, the total acquisition cost plus the total mark-up may be stated in one clause in the Master agreement, provided that the details of each asset’s acquisition cost and mark-up must be appended to each sales contract.

Variable Murabahah

Master Murabahah Agreement

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