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The Principles and Practices of Shariah in Islamic Finance - page 32 / 49

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53. Physical possession or constructive possession by the seller of an asset is required for the asset to qualify for a Murabahah contract. Constructive possession shall be proven via existence of physical evidence of effective transfer or receipts such as warehouse receipt, etc.

Physical or constructive possession of asset by the supplier

Illustration 15: Constructive Possession of Murabahah Asset by IFI

An IFI receives a customer’s application for financing to purchase goods worth RM150,000 to be delivered to the customer’s warehouse with a purchase undertaking. Based on the promise, the IFI disbursed payment to the supplier upon receipt of the third party warehouse certificate as evidence of constructive possession that the goods have been received. The IFI then executes the Murabahah sale at a mark-up price of RM200,000 to the customer, payable in 3 months’ time. The customer immediately accepts delivery since the goods are available in the customer’s warehouse as specified.

54. Transfer of ownership from the IFI to the purchase orderer shall take place upon execution of the Murabahah contract and this could be manifested by way of abandoning the right of ownership (takhliyah) by the IFI or enabling the purchase orderer to make full use of the asset, assuming full liability (tamkin).

ransfer of ownership to the purchase orderer

55. The Murabahah sale shall exclude any sale of currencies and debt for a deferred payment.

Murabahah sale excludes currencies and debt

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