Nobody downloaded yet

Murabahah in Islamic Commercial Law Application within Islamic Banking and Finance Industry - Essay Example

Comments (0) Cite this document
Issue of Murabahah and Opinions of Muslim Scholars and School of Thought: Islamic banking commenced its service with the personal effort of some Muslims who were concerned with the difficulties in riba…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91% of users find it useful
Murabahah in Islamic Commercial Law Application within Islamic Banking and Finance Industry
Read TextPreview

Extract of sample "Murabahah in Islamic Commercial Law Application within Islamic Banking and Finance Industry"

Download file to see previous pages Now there are more than two hundred Islamic financial establishments all over the world. Actually, Murabahah is a term associated with Islamic Fiqh, which indicates to a particular type of sale, and it has nothing to do with financing. Islamic scholars still argue that, the structuring of Murabahah financing is rather different from the overdraft facility prepared along conventional lines as the former one offers numerous benefits to the bank and its customers. In fact, murabahah as a means of finance was permitted by the Sharia scholars with certain conditions. Unless these conditions are fully observed, murabahah is not allowable. According to Sharia, if the conditions are ignored, the transaction becomes void or worthless. “Murabaha is a sale contract for selling a specified item at a mutually agreed mark-up (profit) added to the purchase price” (Trade Based Financing Murabaha Cost-Plus Sale) n.d.). Issues in Murabahah 1. Securities against the Murabahah Payments received from sale are called receivables, and for this purpose, the clients are asked to provide a security. 2. Guaranteeing Murabahah The seller can request the client to provide a third party guarantee. The guarantee doesn’t have the option to charge fee from the client. The reason is that, a person who is charged with a fee for advancing loan may fall under the definition of riba. . 3. Penalty of Non-Payment: In case a client fails to make payment of the fee on the due date, the fee should not be increased. “In Murabahah financing, once the price is fixed, it cannot be increased” (Important Issues Involved in Murabahah n.d.). 4. “Rollover in the Murabahah” (Roll Over in Murabahah 2011): Once a commodity is sold through Murabahah, its possession transfers from the bank to the client, and therefore the seller may not have any right on the property. The seller can claim only the price agreed. 5. Rebate on Former Payments: Occasionally some debtors often like to pay before time to obtain discounts. However within Islam, a large section of Muslim scholars as well as the major schools of thought regard this as un­Islamic. On the other hand, if the Islamic bank or the financial institution gives somebody a discount on its own, it is not offensive, particularly if the clients are needy. The Significant Issue in Murabahah Financing. The subject of debate among the modern Shariah scholars is that the bank or financier can go for a real sale while the client requests Murabahah financing from the bank, because the obligatory commodity, at this stage is not possessed by the bank, and the person cannot sell goods not possessed by him nor can he facilitate a forward sale. It is also decided that the commodity which is sold is given as a security to the seller. Some scholars have the opinion that this can be done only after the buyer has undertaken its delivery and not prior to that. Critically Discuss and Analyze the Discourse from the Different Legislations and Jurisdictions by Presenting the Islamic Finance Cases that Have Come Before the Courts. Islamic banking denotes a system of banking activity or banking that is reliable with the principles and rules of Islamic law (Sharia), and its practical application in the course of the growth of Islamic economics. “Sharia forbids” the payment of fees for lending cash (Riba, usury) on specific conditions, in addition to investing in businesses that offer goods or services measured contrary to its principles (Haraam, forbidden). At the same time, as these principles were employed as the support base for a flourishing financial system in earlier times, it is merely in the late 20th century that numerous Islamic banks were created to apply these principles to semi-private ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Murabahah in Islamic Commercial Law Application within Islamic Banking Essay”, n.d.)
Murabahah in Islamic Commercial Law Application within Islamic Banking Essay. Retrieved from
(Murabahah in Islamic Commercial Law Application Within Islamic Banking Essay)
Murabahah in Islamic Commercial Law Application Within Islamic Banking Essay.
“Murabahah in Islamic Commercial Law Application Within Islamic Banking Essay”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Murabahah in Islamic Commercial Law Application within Islamic Banking and Finance Industry

Islamic banking

...crises and credit crunch in looking for a better and fairer way of managing money and in underpinning the real financing activities. Islamic banking is following the Islamic Shariah law and Islamic financial system which are derived from the Holy Qur’an and Sunnah (Strom et al., 2007). Thirty years ago, Islamic banking existed only in major Islamic countries and become a profitable segment of the banking industry considering that 20 percent of the world’s population was Muslims and Islam being the third largest religion. The...
78 Pages(19500 words)Dissertation

Islamic Finance Law

...for International Business and Investment. GMB Publishing Ltd., United Kingdom. Ariff, Mohamed. (September 1988). Islamic Banking. Asia Pacific Economic Literature, 2:46-62. Ayman H. Abdel-Khaleq. (2004). Islamic Banking: Evolution. International Financial Law Review. Clarke, M A. (2005) Policies and Perceptions of Insurance Law in the Twenty-First Century. Oxford University Press. Chachi, Abdelkader. (2005). Origin and Development of Commercial and Islamic Banking Operations. Islamic Economics, 2005, 18(2): 3–25. DiVanna, Joseph, Shreih, Antoine (2009). A New Financial...
6 Pages(1500 words)Dissertation

Islamic Banking

...the bank was not a commercial one, it did provide funds for the businesses in order to encourage economic growth. After recognizing the Islamic banking system, several banks came into existence, such as Dubai Islamic Bank, Faisal Islamic Bank of Sudan, and the Bahrain Islamic Bank (Shariah-Fortune, 2012). Despite the growing trend in the Islamic banking system, unfortunately the inception of Islamic Banking in Pakistan did not survive. Up till 1985, there was no government initiative in...
6 Pages(1500 words)Essay

Islamic Finance

.... It is important to note that in its application to business and finance, the shariah recognizes change and as policy matter encourages flexibility in business and commercial practices, provided those practices are consistent with certain broad limitations. In this report we shall be discussing the main financial instruments in the framework of business and finance. This includes Sukuk, Murbahah 'Ijra walIqtin and mushrakah 1.1) The Early History of Islamic Banking and FinanceIslamic Banking and Finance as a concept was developed due the strict religious prohibition...
32 Pages(8000 words)Coursework

Islamic Banking and Finance

...are the one kind of economic holders that need to follow some specific rules that can not only satisfy the customers to the banking system but can also make the system run in a better manner. In the case of the development of the banking institutions the semi private and the commercial banks are being created so that the rules can be implemented within the banking system that are being run in the Muslim states. The first modern face of the Islamic banking had been seen in Egypt (Akbarzadeh & Saeed, 2001). This bank had been an undercover bank as it had the rules and...
12 Pages(3000 words)Essay

Islamic banking

...inhibiting profitable activity; the principle is that finance providers and their customers are in a commercial partnership together and should treat each other in an honest and ethical manner. The principles Islamic finance can be summed up as follows: (The True Call, 2009) 1) any prearranged payment over and above the definite amount of principal is forbidden. “Abdullah Ibn Hanzala (RAA) reported that the Messenger of Allah (SAW) said: "A dirham (silver coin) of riba, which a man receives knowingly, is worse than committing adultery thirty-six times” (Ahmad & Daraqutni, n.d) Islamic law allows only the qard-el-hassan or good loan...
22 Pages(5500 words)Essay

Islamic banking

...Islamic Banking Introduction Islamic banking refers to banking services offered in accordance to the Islamic Law, commonly known as Shari’ah. Islamic economics also form the basis for Islamic banking as they guide this form of banking. One of the key features of Islamic banking is that it prohibits the collections, as well as the payment of riba or interest. Islamic banks prohibit the collection of interest on grounds that money should not be treated as a commodity that can generate...
3 Pages(750 words)Essay

Islamic Banking and Finance

...Islamic Banking and Finance Table of Contents Industry overview 3 Products offered 4 National Bank of Abu Dhabi 4 Abu Dhabi Commercial Bank 4 Emirates NBD 5 Key Products offered 6 Financial Performance 7 Conclusion 8 Industry overview Since mid-2000, the United Arab Emirates has established itself as a major financial hub and banking centre in the Middle East. Dubai, in particular, possesses the most developed banking sector in the region. The company has been able to gain such a stature owing to a very robust communications and financial infrastructure, a large...
7 Pages(1750 words)Essay

Islamic Banking and finance

...mechanism. 1. Educating consumers on the principles of working of Islamic banking in general and profit and loss sharing system in particular. This education should involve high focus on the mechanism for PLS financing and the mode of lending and charging within the system. Customers should also be made aware of need and benefits of monthly updating of trade balances in order to facilitate the process of making monthly revisions of profit and loss sharing terms (Hubbard, 2002). 2. Restructuring in the human resources skills and knowledge with reference to the Shariah law and Islamic banking. The human resources...
18 Pages(4500 words)Essay

Islamic finance and banking

...Banking and how the bank follows this features and how the same can be improved. In the course of the essay it is found that Islamic banking in general differs from the normal commercial bank in several aspects. The banks function according to the Shari’a principles that are derived from the teachings of the Quran and Hadith. The banks have a committee that examines whether the bank is following the principles of Shari’a or not. The Shari’a in details talks about the principles of banking and finance as stated and applicable by the...
12 Pages(3000 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Murabahah in Islamic Commercial Law Application within Islamic Banking and Finance Industry for FREE!

Contact Us