By definition, murabaha is a type of sale (ba’i or bay’) in which the seller candidly reveals to the buyer the cost of the underlying commodity (as originally incurred by the seller), on the agreement that a specific amount of profit (mark-up) will be added thereto. The subject matter (mahall al-aqd) of a murabaha transaction (murabaha contract– aqd a-murabaha) is the underlying asset or commodity whose ownership would be transferred from the seller to the buyer in return for the price (thaman).

Not all commodities or assets can underlie murabaha transactions and certain conditions or requirements must be met for a commodity/ asset to be used as a subject matter. As a general rule, all commodities that can be the subject matter of sale (absolute sale – al-ba’i al-mutlaq – i.e., sale with profit) can likewise be used to underlie murabaha transactions. Examples include sales of items such as vehicles, equipment, commodities, real estate properties, shares of screened companies, etc. The shares of a shari’a-screened company can be sold or purchased on a murabaha basis because these shares represent ownership of real assets in the company or held by the company.

Some specific types of transactions cannot take place on the basis of murabaha. For example, murabaha cannot be effected, from a shari’a standpoint, on items that in essence cannot be exchanged through murabaha such as currency exchange (or trading in currencies). The exchange of currencies must be spontaneous (for both countervalues), and if deferred, on the exchange rate on the date of transaction. Similarly, murabaha cannot be used to buy and sell commercial paper representing a debt receivable by the holder (since commercial paper cannot be transferred but at face value).