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). 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.

Intellectual properties such as trademarks, brands, patents, copyrights, and authorship can be used as underlying assets of murabaha transactions. For example, murabaha mode of financing may be sought by a merchant willing to obtain financing from an Islamic bank to purchase a brand name of a well-known retail chain for 30,000 dinars. The purchase transaction will allow the merchant (murabaha buyer) to operate through the retail chain to sell goods holding the brand name. Selling under the brand name will provide product quality assurance to current and prospective customers who are keen to buy products holding this specific brand, and will also add to an established international distribution network. The Islamic bank may purchase the brand name and sell it on the basis of murabaha to the customer at a mark-up price of 45,000 dinars to be paid back over a period of 4 years.