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 or ribh). 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.

From the time the acquisition of an asset has taken place and until the ownership is transferred to the buyer or the purchase orderer, the seller (the financier) is liable for the asset, and may secure takaful coverage on the asset in question before selling it to the purchase orderer. The takaful costs incurred by the financier may be added to, or taken into consideration in the calculation of, the cost of acquisition. Alternatively, the two parties (the murabaha seller and buyer) may agree to exclude takaful charges from the acquisition cost so that either the buyer or the seller assumes them (see also: inclusion of takaful charges in murabaha transactions).