A repricing of murabaha goods (murabaha inventory) which ensues default by the purchaser of such goods. This process involves increasing the amount of original receivables by booking another murabaha transaction against receivables of previous murabaha transaction (s). It entails the addition of another mark-up (ribh) to the receivable in default by a customer.

The additional mark-up is tantamount to explicit riba because it represents an extra amount over and above the debt arising from a murabaha transaction against the receipt of underlying goods by the customer (i.e., ownership of goods had already been transferred to the customer who now owes the seller the price of such goods). Shari’a treats any amount charged on the customer on account of late payment or default as haram (unlawful) source of income.

Therefore, the Islamic bank cannot charge any additional amount by way of penalty if the customer’s default was due to insolvency or force majeure (the creditor bank should defer collection of the debt until the debtor becomes solvent). However, if a solvent debtor defaults, the bank may charge extra amounts provided that this money is channeled to charity.