Why Cost Disclosure Is the Core Principle
Conventional sales involve one principle: the seller and buyer agree on a price, period. Neither is required to disclose what the seller paid or how much profit is involved.
Bay’ al-amanah introduces a different principle: the seller’s original cost is known to the buyer, and the transaction is structured around that cost. This requires amana (trustworthiness) from the seller — the buyer cannot independently verify what the seller paid.
If the seller lies about the original cost, the sale is corrupt (fasid) in most schools and the buyer has a right to rescind.
Murabaha: The Most Important Type
Classical murabaha: “I bought this for 100 dirhams. I am selling it to you for 100 + 10 (10%).” The buyer knows exactly what margin they are paying.
Contemporary murabaha (for home/car finance):
- Client approaches Islamic bank wanting to purchase an asset (home, car, equipment)
- Bank purchases the asset directly from the seller
- Bank then sells the asset to the client at cost + agreed profit margin, payable in installments
- There is no interest — the profit margin is fixed at the time of sale and does not change if the client is late
The AAOIFI Standard 2 governs murabaha in Islamic banking in detail. The bank must actually take ownership of the asset before selling to the client (not just arrange payment) — this distinguishes it from an interest-bearing loan.
See also: Fiqh Al Tawarruq, Fiqh Al Mudarabah Al Mutlaqa, Fiqh Al Gharar, Fiqh Al Bay Bi Al Dayn, Fiqh Al Musharakah