Murabaha - Cost-plus financing / buy-sell arrangement Essentially works by borrower asking lender to purchase asset on the understanding that

after lender has purchased asset, borrower will purchase asset from lender. Agreement is made that lender on-sells asset to borrower at an increased price. Repayment can either be in one balloon payment or by way of installments over a period of time. If repayment is a balloon payment, more commonly known as a Bai Bithaman Ajil or deferred payment sale agreement. Popular structure for purchasing real estate property. It should be noted, however, that as lender on-sells property to borrower, all land title deeds, etc. vest with the borrower. Thus, security provisions of such an arrangement need to be considered carefully so that the lender can adequately protect themselves. Components of this type of Islamic financing include: (i) (ii) (iii) on-sell arrangement; Agreed mark-up on on-sell price; Asset must be Shari compliant;

(iv) Asset must exist at the time of the transaction; thus, this cannot be utilized in futures trading transactions; (v) all terms and conditions of the arrangement must be known by all parties at the time of entering into the arrangement; (vi) reoccurring expenses cannot be passed on to the borrower.