The Concept of Murabaha in Islamic Law and its Modern Applications

Abstract

Murabaha is an important contract in Islamic finance, in which goods are sold with a clear price and profit margin. This contract ensures that the buyer knows the price of the item and the profit of seller , making it akin to a trust-based sale, it is also known as Bai' al-Amanah.

In the contemporary era, Murabaha has been established on modern principles. Islamic banks are utilizing Murabaha extensively to fulfill the needs of their customers. When a customer requires an item, he approaches an Islamic bank. Instead of providing loans with interest, Islamic banks facilitate the purchase of the desired item based on the Murabaha contract. This article aims to explore the concept of Murabaha in Islamic Law and its contemporary applications.

In contemporary Murabaha contract, several stages are involved. Initially, there is an understanding between the Islamic bank and the customer regarding the basic information of the item to be purchased. Subsequently, the purchase of the item takes place, and in the final stage, the item is handed over to the customer. Islamic scholars have raised some concerns about prevalent Murabaha contracts, but they have also provided answers to these concerns.

This article provides a comprehensive examination of these concerns from a legal perspective. Qualitative research has been employed in this article. Researcher concluded that Murabaha is a beneficial contract that can be used to derive significant benefits. However, it is necessary to strictly adhere to the rules and regulation of Murabaha as well. Islamic banks to some extent also consider these restrictions, but there is a need to further improve them.