Murabaha is a type of trust-based sale (buyu al-amana) whereby acquisition of assets is financed on short or relatively long term basis. The contract of murabaha (aqd al-murabaha) is entered into between a seller and buyer on cost plus mark-up basis. Payments are made either on a deferred or cash basis (deferred murabaha or cash murabaha).

Total costs of murabaha are the costs incurred in the process of purchasing or acquiring an asset including its price (thaman) and direct expenses. Direct expenses reflect costs or expenses incurred to directly enable the acquisition of the murabaha goods by the murabaha seller and delivery of the goods to the murabaha buyer (purchase orderer).

Total costs = price + direct expenses

Direct expenses = transportation costs + assembly & installation costs + storage costs + taxes + insurance

The total costs of murabaha don’t include indirect expenses such as staff wages, labor charges, and other administrative expenses.