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.

Some murabaha buyers (in credit murabaha/ deferred murabaha) may be willing to settle their murabaha obligations earlier than contractually agreed or specified date, with their eyes on earning a discount (rebate) on the deferred price (cost + mark-up). The majority of shari’a jurists, hailing from the four major schools of thought (Islamic jurisprudence) do not allow this rebate for early payment in murabaha if the discount is stipulated in the contract for early payment. Otherwise, the contract would turn into an interest-based installment sale which shari’a outspokenly prohibits. Therefore, if the buyer makes early payment and there is not mutual understanding or agreement between the seller and buyer in respect of any discount in the price of murabaha, the seller has discretion to give a rebate or not. However, this should not be followed as a common practice in murabaha transactions.

In short, as long as the rebate is voluntary, there is no shari’a objection as to giving or receiving it.