Escolar Documentos
Profissional Documentos
Cultura Documentos
Submission Date:
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JALIL KHAN A-30
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Dedicated to
My beloved Parents who are always caring to me
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Table of Contents
Sr.
Description
No.
1. Murabaha & Its Application in Pakistan
2. Conditions of Murabaha.
8. Murabaha in Pakistan
9. Murabaha Financing
10 Shariah Appraisal
.
15 Conclusion
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16 References
.
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In the whole world every country has its own financial system. In
Pakistan the financial system which is working now days is based on
interest. Interest is strictly prohibited in Islam.
Islam has its own financial system so in Pakistan and the entire whole
Islamic world many scholars’ have worked for interest free financial system
and introduced a system which is interest free. Murabha is also one element
of Islamic financial system. The history of Murabha is that,
During the second half of the 1st Hijrah a new business transaction
was introduced by Imam Malik in his famous book Al-Mutta under the
caption.
“Sale at a mutually agreed profit Margin”
He said Yahya told me that Malik said:
There is unanimity of opinion in our place (al-madinah) regarding cloth
purchased by a person in a town and then takes it to another town wherein he
sells it at a mutually agreed profit margin. The money paid to a commission
agent (the middle man.) will not be computed (in the sale price) nor the cost
of packing and bundling. (More-over) the (personal) expenses incurred by
the businessman will not be included nor the house rent. As far as it is
concerned with the costs putted as a part of the basic price but no profit will
be added to it unless the seller advises the bargainer about all of them after
knowing about them, it is not objectionable.
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upon between the contracting parties, In Murabaha the seller disclosed the
cost of the sold commodities tells the purchaser that he has purchased
commodity say for 100 rupees and that he will charge 10 rupees as profit
over and above the original price. It is also permissible to fix the profit in
percentage i.e. 5% or 10% of the cost. Murabaha is a contract which has
following parties.
Purchaser (Mushtari)
Seller (Baay)
Conditions of Murabaha.
There are some important and necessary conditions of Murabaha which are
as follow.
1. Disclose of Original Price:
It is necessary for the validity of the
Murabha transaction that the purchaser or Murabaha purchaser should have
knowledge of the original price. This means that s4ellers should disclose
price of the commodity. If the price is not disclosed in the session of
contract and contracting parties should leave the majlis the contract will be
invalid.
2. Fixation of Profit:
The profit should be fixed and add to the cost price
and mention in the contract. e.g. A Purchases Books for Rs. 500 and include
Rs. 50 as profit or markup is fixation of Profit.
3. Ascertainment of Price:
Murabaha is valid only where the exact
price is not known the commodity can not be sold on Murabaha. Instead it
will be sold without reference to the cost this is applicable to coses where a
person has purchased two or more things. According to Mufti Muhammad
Taqi Usmani Murabaha is valid only where the exact cost of a commodity
can be ascertained in lump sum by mutual consent.
Example 1:
A Purchased a Pair of Shoes for Rs. 100 he want to sale it on
Murabaha with 10% Mark up the exact cost is known here so the Murabaha
sale is valid.
Example 2:
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A Purchased a ready made suit with a pair of shoes in a single
transaction for a lump sum of Rs 500. A can sell the suit including shoes on
Murabaha. But he can not sell it separately on Murabaha. Because the
individual cost of shoes is unknown. If we want to sell shoes so he must sell
it on lump sum without reference to the cost or the markup.
5. Ownership of subject:
The subject of sale must be in the ownership
of the seller at the time of sale. Thus what is not owned by the seller can not
be sold if he sells before acquiring its ownership the sale is void.
Example:
A Sale’s to B a car which is presently owned by C. But A is
hopeful that he will buy from B and Deliver to C. This sale is void because
the car was not owned by A at the time of sale.
Example:
A has purchased car from B but B has not delivered to A or his
agent A Can not sale it to any person until its delivery.
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are only carriage exp. And there are also some other exp. For example A
purchases cloth for the purpose of producing or making readymade. He will
also pay sewing exp. So we can say that there are following two types of
exp. That is normally incurred.
1. Wages
2. Carriages
3. Converting
Now we have to decide that such exp will be include in the price of the
commodity or not Muslim jurist have different opinion in this regard which
are as follow.
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+ + =
Price of Transporting Converting
commodity Expenses Expenses.
But Imam Shafi’i who is a very brilliant and disciple student of Imam Malik
has expanded this concept to include credit transaction as well as goods
whose specifications have been described by the buyer to the seller
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Secondly because he (the would-be seller) is exposed to risk (in view of your
condition): if you purchase at such and such a price I shall let you have such
and such a profit margin.
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by comparable with prevailing market interest rates, the same is commonly
used by a large number of Islamic financial institutions as an easy way out
Now days the Islamic Banks use this technique to finance projects.
They buy commodities for cash and then sell them to a potent ional client on
cost plus profit principal on deferred payment basis. In Islamic Banks
Murabaha is practiced in the following way.
i. The client approaches the ban with the request to purchase for him
certain goods. He also provides the description of the required goods.
ii. In case the bank agrees to his request it asks the client to give an
undertaking to purchase the goods with a stated profit margin. The
banks can enter into an actual sale agreement with the client if the
commodity is owned by the bank.
iii. After signing the “undertaking for purchase” the bank makes purchase
of required goods.
iv. After the bank has purchased goods and taken possession of them, it
enters into a Murabaha contract with its client. The contract includes
mark-up over the cost of goods and the schedule of payment. The
bank hands over goods to the client in lieu of cheques bearing future
dates according to the payment schedule.
v. In order to secure the payment of price, the payment of price, the bank
may ask the buyer to furnish a security in the form of a mortgage.
vi. In case of defect in the commodity discovered later on, the buyer can
return it to the bank and claim re-imbursement of what he has paid. In
order to avoid any riba element, the bank provides that the agreement
of the bank and the actual execution of buying do not contribute any
legal obligation on the partner to buy. Hence the risk is still that of the
bank. Until the partner fulfills his original promise of re-buying the
commodity, the risk remains with the bank, which justifies the profit.
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FLOW OF TRANSACTION IN MURABAHA
CUSTOMER
SUPPLIER
Purchase
against
cash (say
Rs. 1000) Sale
through against
agent on Deferred
spot Basis Payment
on cost +
Profit
Basis (Say
Rs. 1150)
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Murabaha in Pakistan
MURABAHA FINANCING:
Purchase of goods by banks and their sale to client at appropriate mark-up
in price on deferred payment basis.
This technique of mark-up is applied for financing the requirements of
trade, commerce and industry. Under the technique of mark-up, a sale
transaction is arranged at price mutually agreed upon between the buyer and
seller. The sale price consists of the cost of goods plus margin of profit and
the same is payable by the buyer on deferred basis either in lump sum or in
installments.
While sanctioning the amount of finance, the bank takes into
consideration the credit worthiness, dealings and cash flow of the customer.
It also studies the marketability of the commodities or goods manufactured
and securities offered to ensure that finances made available to him are
properly utilized and finance is received back by the bank on due date as per
stipulations of the sanction.
SHARIAH APPRAISAL:
The mode mentioned above is infact, combination
of bay’ al-Murabaha and bay’ al-mu’ajjal, because the bank charges an
increase over the above the original price which is payable in future. It is
Murabaha because the buyer relying on the words of seller gives increase
over and above the cost to the seller. It is bay’ al-mu’ajjal also because the
payment is made on specified dates in future. It is permissible for seller in
Shariah to charge increase in price over the spot market rate. Modern
Murabha transaction normally takes place on the basis of order supply in
which the order supplier is not required to disclose his purchase price.
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The Muslim scholars in Pakistan entertain some doubts about the
validity and legitimacy of mark-up financing. The objections raised by the
scholars are as follows.
i. The bank does not purchase the commodity needed by the
client. It only provides him finance for its purchase. This fact is
confirmed by the state bank’s gazette of Jan. 1981, which states that:
“the bank will not provide the customer rice, but will give him its
market price and it will be presumed that the bank has itself purchased
required quantity of rice from the market and sold it with profit
margin to the customers, after 90-days from the date of purchase”.
Besides, the banks use the words of “amount of finance” for purchase
price in their agreements, which refer to loan provided by the bank to
the client. All this confirms that it is not a sale; instead, it is mark-up
financing.
ii. The bank charges a predetermined increase over the amount of
finance, which makes Murabha similar to charging increase over and
above the amount of loan.
iii. It does not bear any risk.
iv. Unlike the Islamic Banks where to agreement are make with the
client and where an actual sale contract is concluded only when the
commodity is purchased by the bank and taken possession of, the
Pakistani banks make one agreement which contains the provisions of
amount of finance, i.e. purchase price, added profit margin, sale price
and mode of payment thus, the bank is not concerned with the
purchase of commodity.
v. Murabaha financing represents sale of a thing, which is not
owned by the seller and that, is prohibited in Islam.
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Islamic bank of Jordan provides finance for purchasing goods which can be
pledge e.g. if a person wants to purchase car so he contacts with bank. The
bank purchases car form dealer of car. The car registers with the name of
Bank. Now bank and customer contracts Murabha on the basis that client/
customer will retain the car as pledge with the bank and also some other
evidences.
Many interest based banks also attracts from Murabha and they also opens
Islamic window of their banks BCCI (LOND) is also adopting and working
on Murabha.
Saudi Arabia:
In Saudi Arabia the largest Islamic Bank or commercial bank
National commercial Bank has created on international fund for this
purpose. 3
There is a difference between Murabha & riba that in riba lender after a
specified time gets a specified amount on the other hand principal amount
retains in the ownership of lender. But in Murabha there is not Debt but one
person sell a thing to an other person and the possession of the thing
transfers to the second person but first person gets his reward in the shape of
profit.
Conclusion
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The cause of this is only and only unspecialized persons in the
Islamic banking which make transaction which becomes near to haram.
These persons come form conventional Banks and they don’t know about
Islamic banking. That’s why every person says that these Molvies have
made sood (Riba) as Hillal but there is no difference between Islamic
banking and conventional banking. Because a common person can not
indifferent between conventional bank and Islamic bank. If we ask a
common person about Islamic banking they says that If I go to national bank
so they will take 10% interest and if I will go to Islamic bank they will
charge me 17% profit only the difference is this.
Now I will try to explain that how a transaction becomes haram
with special reference to Islamic banks in Pakistan.
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Reference Books and links
1. An introduction to Islamic Finance.
3. BankIslami Pakistan
http://en.wikipedia.org/wiki/BankIslami_Pakistan_Limited
4. www.sbp.org.pk/press/Essentials/Essentials%20of%20Islamic.html
5. http://www.paklinks.com/gs/religion-scripture/120961-riba-vs-
murabaha.html
6. http://en.wikipedia.org/wiki/Talk:Islamic_banking.
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