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). Murabaha could be simple (ordinary murabaha or plain vanilla murabaha) or enhanced with additional features such as wa’ad/ wa’d (promise) to purchase by a purchase orderer (murabaha to the purchase orderer).

Murabaha to purchase orderer (MPO) sale by the Islamic bank (as the seller) to the customer (the purchase orderer) is not permissible if the bank purchases an asset from the customer and subsequently sells it to the customer based on murabaha. Likewise, the contract (aqd) is also not permissible if the asset purchased by customer from supplier is subsequently purchased by the bank and sold to the customer based on murabaha.

In principle, the Islamic bank shall not conclude the murabaha contract with the purchase orderer prior to the purchase of assets or goods to be sold on the basis of murabaha.