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The Principles and Practices of Shariah in Islamic Finance - page 45 / 49





45 / 49

Use of security deposit as partial payment of Murabahah selling price

Wadiah deposit as a pledge


108. This security deposit may be treated as part of the payment of the agreed selling price under the Murabahah contract and hence is not refundable.

Illustration 22: Refund of Purchase Orderer’s Deposit

A customer promises to purchase and places 10% of cost of purchase as a deposit with an IFI to finance the purchase of RM50,000 worth of textiles. The financing is based on Murabahah at a mark-up selling price of RM75,000 for a 6 months financing period. Upon receipt of goods by the customer the outstanding amount payable to the IFI is RM70,000 (less RM5,000 security deposit).

On the other hand, in the case where goods are purchased but the customer does not take delivery, the IFI incurs disposal costs of RM2,000 and is able to dispose off the goods at RM49,000. The loss on disposal and the disposal costs amounting to RM3,000 is deducted from the security deposit and the balance of RM2,000 is returned to the customer. If the goods are disposed at RM55,000, the refund to the customer is RM3,000. There will be no refund to

the customer if the disposal value is RM52,000.

109. Any form of deposit such as Wadiah, deposited by the purchase orderer with the IFI, may be used as a pledge to fulfil the liabilities of the purchase orderer under the Murabahah contract. In the event of default, the IFI may use the pledged deposit to redeem the payment based on an off-set mechanism.

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