Fiqh al-Bay' al-Murabahah — The Cost-Plus Sale in Islamic Law: The Murabahah Contract (The Seller Discloses the Cost of the Item and the Profit Margin Added, Creating a Transparent Mark-Up Sale), How Murabahah Has Become the Most Commonly Used Structure in Islamic Banking for Home Finance, Auto Finance, and Trade Finance, and the Critical Distinction Between a Classical Murabahah and the Murabahah li-l-Amir bil-Shira' (Murabahah to the Purchase-Orderer)

Fiqh al-Bay' al-Murabahah (فِقهُ بَيعِ المُرَابَحَة — Jurisprudence of the Cost-Plus Sale; *murabahah*: from *r-b-h*: to profit; murabahah = the profit-disclosing sale — a sale in which the seller discloses their cost and the profit margin added; the classical definition: a sale where the seller says 'I bought this for X, and I am selling it to you for X plus [percentage or fixed amount] profit'; the transparency requirement: the seller must truthfully disclose the original cost; if the seller lies about the cost, the buyer has the option to rescind the contract upon discovering the lie; classical schools recognized murabahah as a valid, named sale type distinct from musawamah [regular bargaining sale where cost isn't disclosed]; validity: all four schools recognize murabahah as a valid sale; it is a bay' [sale] — the object must exist, must be owned, must be delivered; the absence of riba in classical murabahah: murabahah is cash-sale with a disclosed mark-up; the mark-up is for profit from a sale, not for time-value of money on a loan; MODERN BANKING CHALLENGE — converting to deferred payment: classical murabahah was typically a cash sale; the challenge for Islamic banking was: how to use murabahah for financing [which involves deferred payment]? Murabahah li-l-Amir bil-Shira' [the murabahah to the purchase-orderer]: the key structure that enabled Islamic banking to use murabahah for financing; structure: [1] client approaches bank and says 'I want to buy car X at price Y — please buy it for me'; [2] bank purchases the car from the dealer [bank must genuinely take ownership]; [3] bank sells the car to the client at cost plus agreed profit margin, with payment deferred [installments or lump sum at a future date]; [4] the mark-up covers the bank's profit; [5] the client owns the car from the moment of bank-to-client sale; the prohibition of 'two sales in one': the bank cannot commit to sell to the client BEFORE the bank owns the commodity; the two transactions [bank buys, bank sells to client] must be genuinely sequential with genuine ownership transfer between them; this is the most common Shari'ah compliance failure in murabahah — banks sometimes complete the paperwork simultaneously without genuine sequential ownership; contemporary dominance: murabahah accounts for approximately 60-80% of Islamic banking assets globally by value; it is used for: [1] home purchase [though musharakah mutanaqisah is also used]; [2] auto financing; [3] trade finance [murabahah for letters of credit]; [4] personal finance; [5] corporate capital expenditure; commodity murabahah: using London Metal Exchange commodities [aluminum, copper, platinum, palladium] as the underlying commodity for structured murabahah transactions; the commodity is bought and sold within seconds through brokers; widely used for liquidity management and deposits in Islamic banking; controversial because the commodity never leaves a warehouse and the transaction is purely financial; AAOIFI Standard 2 and Standard 22 cover murabahah and commodity murabahah respectively; the Shari'ah debate: some scholars accept murabahah li-l-Amir bil-Shira' unreservedly; others accept it conditionally [requiring genuine ownership and risk transfer]; a minority view [Taqi Usmani's earlier position, later revised] held that it should be a last resort; the overwhelming contemporary practice accepts it with the ownership conditions) is Islamic banking's dominant workhorse structure.