Master Murabaha Financing Agreement

Published: 2021-10-11 15:40:11
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Murabaha and disbursement of the new one. . Rebate on early payments * If the customer makes early payment and there is no commitment from the institution in respect of any discount in the price of Murabaha, than the institution as the sole discretion in allowing them the rebate. * It is not recommended to make it a practice and must be avoided in normal course of business. Such issue, if arises, should be brought in the knowledge of Shariah advisor 4. Penalty on late payments As soon as the Murabaha is executed, the Murabaha price becomes a receivable (Dayn) for the Bank.
Hence, any amount charged over and above the “dayn” amount will be Riba. * However, it is permissible to have an undertaking from the customer to pay an amount of money or a percentage of the debt to be donated to charitable causes in the event of delay in payment/installments. . Subject matter of Murabaha * Goods must exists at the time of execution of Murabaha. * Murabaha cannot be done in all commodities, e. g. such as currencies, gold, silver. * Murabaha cannot be used for paying utility bills, wages, overhead expenses, etc. * General rules of sale related to subject matter must be followed 6.
Purchase Evidence * In order to ensure that the customer actually purchased the assets as claimed, the customer is required to submit asset purchase evidence along with Offer & place after the agency agreement. * Asset purchase may be in the form of Invoices, elivery orders, truck receipts etc. * In some cases, however, it may be too burdensome for the client to submit all the invoices as the number of invoices may run into hundreds. * For example, cotton purchases are generally in small quantities from various sources and hence for each Sub-Murabaha there may be too many invoices to submit.
It is suggested to furnish considerable sample of invoices along with summary of all purchases. 7. Direct Payment in Murabaha In many cases, the disbursement is made to the customer as an agent of the bank. * In order to ensure transparency of the Murabaha, it is preferable that isbursement / payment be made directly to the supplier. Profit Recognition in Generally in Murabaha transaction there are in two stages: * Investment Stage (Agency to Purchase) * Financing Stage (Declaration to payment) * The profit for the Murabaha transaction can be recognized after the goods are sold by the bank to the customer.
Training of Customers & Bank staff Proper training & understanding of is very important for * Bank staff dealing with the Murabaha * Customers purchase officers & accounts staff. Process of Murabaha differ from product to product 10. Application of Murabaha is not simple for all products * Its application differs from products to products like * shares * Leather * Cotton * Gas * petrol Sugar cane Therefore the RM/RO dealing with the customer needs to understand and define step wise process flow along with the credit approval for each new customer/ industry.

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