The term ‘Bai-Murabaha’ has been derived from Arabic words and means purchase and sale and another word means an agreed-upon profit. So, Bai-Murabaha’ means a sale on agreed-upon profit.
Bai-Murabaha may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods (permissible under Islamic Shariah and the Law of the land), to the buyer at a cost plus agreed profit payable in cash or on any fixed future date in lump-sum or by installments. The profit marked-up may be fixed in lump-sum or in the percentage of the cost price of the goods.
The profit is shared as per agreement.
Loss born by the client.
The amount can be paid on an installment basis.
Duration usually 1-2 year(s).
Rebate may be given on Early Adjustment.