Editing Islamic banking and finance (section)

==== Murâbaḥah ====
{{Main| Murabahah}}

''Murabahah'' (or ''murabaha'') is an Islamic contract for a sale where the buyer and seller agree on the [[Markup (business)|markup]] (profit) or "[[Cost-plus pricing|cost-plus]]" price<ref name="RATMTRIBP2014:31">Turk, ''Main Types and Risks'', 2014: p.31</ref><ref name="Irfan-2015-135">{{cite book|last1=Irfan|first1=Harris|title=Heaven's Bankers|date=2015|publisher=Overlook Press|page=135}}</ref> for the item(s) being sold.<ref name="IIFTU1998:65"/>
In Islamic banking it has become a term for both a marked-up price and deferred payment – a way of financing a good (home, car, business supplies, etc.) whereby the bank buys the good and resells it to the customer at higher price (informing the customer of the price increase), and offering to take payment in installments or in a lump sum.<ref name="IIFTU1998:72-81">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.72-81</ref>

''Murabahah'' has also come to be the most common type of Islamic finance.<ref name="IFIM"/><ref name="Irfan-2015-139"/><ref name="IIFTU1998:65">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.65</ref> One estimate is that 80% of Islamic lending is by ''Murabahah''.<ref name="Haltom2014">{{cite web|last1=Haltom|first1=Renee|title=Econ Focus. Islamic Banking, American Regulation|url=https://www.richmondfed.org/publications/research/econ_focus/2014/q2/feature1|website=Federal Reserve Bank of Richmond|access-date=26 August 2015|date=2014 |version=Second Quarter}}</ref> This is despite the fact that (according to Uthmani) Islamic finance Shari‘ah supervisory boards "are unanimous" in agreement that ''Murabahah'' loans "are not ideal modes of financing", and should be used only "when more preferable means of finance – "''musharakah'', ''mudarabah'', ''salam'' or ''istisna''' – are not workable for some reasons".<ref name="IIFTU1998:12" />

''Murabahah'' differs from conventional finance (such as [[mortgage loan|mortgage]]s for homes or [[hire purchase]] for furniture or appliances), in that the fixed return with which the bank is compensated is called "profit" and not interest,<ref name="IFIM"/> and that the financier may not keep for itself any penalties for late payment.<ref name="RATMTRIBP2014:31"/>{{#tag:ref|"In order to pressurize the buyer to pay the installments promptly, the buyer may be asked to promise that in case of default, he will donate some specified amount for a charitable purpose."<ref name="IIFTU1998:71">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.71</ref>|group=Note}}

Economists have questioned whether ''Murabahah'' is actually distinct from debt- and interest-based finance. The fact that there is a principal and a payment plan means that there is an implied interest rate,<ref name="Haltom2014" /> based on conventional banking interest rates such as [[LIBOR]]. Others complain that in practice most "''murabaḥah''" transactions do not involve actual buying or selling of goods or commodities, but are merely cash-flows between banks, brokers and borrowers.<ref name="mmhi-2008">{{cite magazine|url=http://www.arabianbusiness.com/misused-murabaha-hurts-industry-122008.html|title=Misused murabaha hurts industry|magazine=Arabian Business|date=1 February 2008}}</ref> In contrast to LIBOR, Islamic banks lend money based on their own reference rate known as the Islamic Interbank Benchmark Rate which "uses expected profits from short-term money and a forecasted return on the assets of the bank receiving funds".<ref>{{Cite news|url=https://www.wsj.com/articles/SB10001424052970204443404577054150155788364|title=Islamic Banks Get a 'Libor' of Their Own|last=Burne|first=Katy|date=2011-11-25|work=[[The Wall Street Journal]]|access-date=2019-11-09|language=en-US|issn=0099-9660}}</ref>

=====Bai' muajjal=====
In Islamic jurisprudence (''[[fiqh]]''), ''Bai-muajjal'', also called ''bai'-bithaman ajil'',<ref>{{cite web |title=TRADE-BASED FINANCING MURABAHA (COST-PLUS SALE) |url=http://staff.uob.edu.bh/files/620922311_files/Murabaha.pdf |archive-url=https://web.archive.org/web/20110917150404/http://staff.uob.edu.bh/files/620922311_files/Murabaha.pdf |url-status=dead |archive-date=17 September 2011 |access-date=15 August 2017 }}</ref> or BBA, is a credit sale or deferred payment sale, i.e. the sale of goods on a deferred payment basis. In Islamic finance, the ''bai' muajjal'' product also involves the price markup of a ''murabahah'' contract, and a ''murabahah'' product involves a ''bai-muajjal'' deferred payment. Thus the terms and are often used interchangeably, (according to Hans Visser),{{sfn|Visser|2013|p=66}} or "in practice ... used together" (according to Faleel Jamaldeen).<ref name="FJIFD2012:160"/><ref name="IFN-BM">{{cite web|title=Bai Muajjal |website=IFN, Islamic Finance News |date=27 November 2015 |url=http://www.islamicfinancenews.com/glossary/bai-muajjal |access-date=26 September 2016}}</ref>
 
However, according to another (Bangladeshi) source, ''Bai' muajjal'' differs from ''Murabahah'' in that the client, not the bank, is in possession of and bear the risk for the goods being purchased before completion of payment.<ref name="investmodes">{{cite web|title=INVESTMENT MODES: MUDARABA, MUDHARAKA, BAI-SALAM AND ISTISNA'A|url=http://bankingarticle.blogspot.com/2011/02/investment-modes-mudaraba-mudharaka-bai.html|website=Banking Articles|access-date=7 December 2016|date=February 2011}}</ref> And according to a Malaysian source, the main difference between BBA (short for bai'-bithaman ajil) and ''murabaha'' – at least as practiced in Malaysia – is that ''murabaha'' is used for medium and short term financing and BBA for longer term.<ref name="IBaFiM2013-121">{{cite book|chapter-url=https://books.google.com/books?id=HWBkCgAAQBAJ&q=muamalat+contracts&pg=PA117|title=Islamic Banking and Finance in Malaysia; System, Issues and Challenges|date=2013|publisher=Al Manhal|isbn=9789670393728|page=121|chapter=6. Muamalat Contracts in Islamic Banking and Finance|last1=ABʻAZIZ|first1=MUHAMMAD RIDWAN|access-date=5 April 2017}}</ref><ref name="Iqbal-2007-91">{{cite book|last1=Iqbal|first1=Zamir|last2=Mirakhor|first2=Abbas|title=An Introduction to Islamic Finance Theory and Practice|date=2007|publisher=Wiley Finance|page=91}}</ref>

''Bai' muajjal'' as a finance product was introduced in 1983 by Bank Islam Malaysia Berhad.{{sfn|Visser|2013|p=66}}<ref>{{cite book |url=https://mpra.ub.uni-muenchen.de/29414/ |last1=Hasan |first1=Zubair |date=2011 |title=Scarcity, self-interest and maximization from Islamic angle.| access-date=22 March 2017 |page=318}}</ref>

=====Bai' al 'inah (sale and buy-back agreement)=====
''Bai' al inah'' (literally, "double sale"<ref name="Kettell">{{cite book |last1=Kettell |first1=Brian |title=Frequently Asked questions in Islamic Finance |pages=299–304 |date=2010 |chapter=Index|doi=10.1002/9781118371923.index |isbn=9781118371923 }}</ref> or "a loan in the form of a sale"),<ref name="TaPoMIB">{{cite book|last1=Abu Umar Faruq Ahmad|title=Theory and Practice of Modern Islamic Finance: The Case Analysis from Australia|publisher=Universal-Publishers|page=308|url=https://books.google.com/books?id=wRlI0nJp5mEC&q=Bai%27+al+%27inah&pg=PA244|access-date=21 July 2015|isbn=9781599425177|year=2010}}</ref> 
is a financing arrangement where the financier/bank buys some asset from the customer on [[Spot market|spot]] basis, with the financier's payment constituting the "loan". The asset is then sold back to the customer who pays in installments over time, essentially "repaying the loan". Since loaning of cash for profit is forbidden in Islamic Finance, some scholars do not believe ''Bai' al 'inah'' is permissible in Islam. According to the Institute of Islamic Banking and Insurance, it "serves as a ruse for lending on interest",<ref name="ISBI-B">{{cite web |title=Glossary of Financial Terms – B |url=http://www.islamic-banking.com/glossary_B.aspx |website=Institute of Islamic Banking and Insurance |access-date=26 August 2015 |archive-url=https://web.archive.org/web/20150829025808/http://www.islamic-banking.com/glossary_B.aspx |archive-date=29 August 2015 |url-status=dead }}</ref> but ''Bai' al inah'' is practiced in Malaysia and similar jurisdictions.<ref>{{cite web |url=https://islamicbankers.me/islamic-banking-islamic-contracts/financing-commodity-murabaha-tawarruq/ |title=Financing : Commodity Murabaha & Tawarruq | website=Islamic Bankers Resource Centre | first1=Amir |last1=Alfatakh |date=11 June 2014 |access-date=18 August 2017}}</ref><ref>[http://www.azmilaw.com/Article/Article_8_&_9/Article_9_Tawarruq_00093603_.pdf The emergence of Islamic financing based on the Syariah concept of Tawarruq] |AZMI and Associates| 2008</ref>