Murabahah is a sale-based transaction (a cost-plus sale) which involves the sale of goods/ assets for a price (thaman) consisting of the actual cost and a preset profit mark-up (ribh). The purchase price (actual cost) and the mark-up must be made known to the ultimate buyer (the murabahah buyer) before the contract is entered into. On the other hand, musawamah (bargaining sale), is an absolute sale in which the seller and buyer negotiate the price without any reference to the actual acquisition cost incurred by the seller. Each party does his best to ensure the sale is effected at the most favorable price thereto.

Therefore, unlike murabahah, the seller in musawamah is under no obligation to disclose his costs and profit margin to the buyer. And all other conditions relevant to murabahah are also observed in, and applied to, musawamah. In essence, murabahah belongs to the class of trust-based sales (buyu’ al-amanah) where shari’ah stipulates that the seller acts in a transparent manner to reveal the real cost of the subject matter of sale. Once this done, the two parties can agree on the margin (mark-up or ribh) or deduction (hatitah) that would be applied to that cost.