192 Ahmad Block, New Garden Town, Lahore - Pakistan.

1. 192 Ahmad Block, New Garden Town, Lahore - Pakistan. Ph: (92-42) 35913096 - 98, Fax: (92-42) 35913056 Email: info@alhudacibe.com www.alhudacibe.com

2. Murabahah Abdul Samad AlHuda CIBE

3. Presentation Outline • This module will highlight the following aspects of Murabaha: • Step by Step Murabaha Financing • Documentation • Profit Calculation • Issues • Conclusion

4. Murabaha - Definition /Introduction In literary terms Ba’y Murabaha means “sale on profit” Murabaha is a particular kind of sale where the seller discloses its cost and profit charged thereon. The price in this sale can be both on spot and deferred

5. MFI Murabaha • The product of Murabaha that is being used in MFI MFIing as a mode of finance is something different from the Murabaha used in normal trade. • This transaction is concluded with a prior promise to buy, submitted by a person interested in acquiring good through the institution.

6. MFI Murabaha • It is a contract wherein the institution, upon request by the customer, purchases an asset from the third party usually a supplier/vendor and resells the same to the customer either against immediate payment or on a deferred payment basis.  • It is called Murabaha to the purchase order. • It is a bunch of contracts completed in steps and ultimately meet the financial needs of the client.

7. Scope of Murabaha •   As it is a kind of sale, there must be a seller and buyer and something that is bought and sold. The institution is the seller and the client is buyer.  •  It cannot be used as a substitute for running finance facility, which provides cash for fulfilling various need of the client. • It is fixed price sale and normally is done for short term. • The transaction can be used in order to meet the working capital requirement however it cannot be used to meet liquidity requirements.

8. MFI Client Agreement to Murabaha Step by Step Murabaha Financing Client and MFI sign an Agreement to enter into Murabaha (MMFA).

9. MFI Client Agency Agreement Step by step Murabaha Financing Client appointed as Agent to purchase goods on MFI’s behalf. In this case, the concerned branch Manager will explain the appointment of client as an Agent, which will be checked by the Shariah Advisor.

10. Supplier MFI Client Agency Agreement Disbursement to the agent or supplier Agreement to Murabaha Step by step Murabaha Financing MFI gives money to agent/supplier for purchase of goods.

11. Vendor Delivery of goods Transfer of Risk MFI Agent Step by Step Murabaha Financing The agent takes possession of goods on MFI’s behalf.

12. MFI Client Offer to purchase Step by Step Murabaha Financing Client makes an offer to purchase the goods from MFI through a declaration.

13. Murabaha Agreement + Transfer of Title MFI Client Step by step Murabaha Financing MFI accepts the offer and sale is concluded.

14. MFI Client Payment of Price Step by step Murabaha Financing Client pays agreed price to MFI according to an agreed schedule. Usually on a deferred payment basis (Bai Muajjal)

15. Steps Of MFI Murabaha MOU  Order Form  Agency Agreement  Purchase  Payment of Purchase Price‌  Possession  Offer and Acceptance (Declaration)  Payment of Murabaha Price

16. Murabaha Documentations There are a number of documents involved in a Murabaha financing transaction. The most essential of these documents are: • Master Murabaha Facility Agreement • Agency Agreement • Order Form • Description of assets • Declaration • Summary Payment Schedule

17. ISSUES RELATED TO MURABAHA

18. Issues Related To Murabaha

19. EVIDENCE OF PURCHASE

20. PHYSICAL VERIFICATION OF GOOD

21. DELAYED DECLARATIION

22. ABSENCE OF DATES ON DECLARATION & INVISES

23. DIFFRENCE IN QUANTITIES

24. DISCOUNTS IN MURABAHA

25. REBATE

26. PRICING IN MURABAHA

27. 192 Ahmad Block, New Garden Town, Lahore - Pakistan. Ph: (92-42) 35913096 - 98, Fax: (92-42) 35913056 Email: info@alhudacibe.com www.alhudacibe.com