Murabaha (also spelled murabahah) is a shari’a compatible mode of debt financing which involves the sale of a commodity mostly for a deferred price. The two parties to the contract are: a financier (usually an Islamic bank) and a client. In its business form, murabaha is initiated when a potential buyer orders a commodity to pay for it with a specified mark-up (profit or ribh). The seller accepts and accordingly procures the commodity. Once the commodity is legally possessed by the seller, the buyer is asked to purchase it and takes delivery. As such, the commodity must exist at the time of contract, and must be owned by the seller at that time whether via constructive (qabd hukmi) or physical possession (qabd fe’eli). Furthermore, quality and quantity must be defined in clear-cut terms, and the exact date and method of delivery must also be specified.

The acquisition cost (incurred by the murabaha seller– the financier) constitutes the the cost portion of the murabaha price (thaman al-murabaha). It includes direct expenses incurred to facilitate the acquisition of murabaha object by the financier and the delivery of it to the customer (the murabaha buyer). Direct expenses consist of acquisition price, transportation, storage, assembly, taxes, insurance (takaful) and any other expenses established by customary practice (urf tejari). On the other hand, indirect expenses such as staff wages, labor charges, and other general expenses are not part of the cost of acquisition, and shall not be added thereto. Installation costs of some types of assets (machinery and equipment) may be part of the cost portion of the asset in question.