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Definition Of Murabaha:


An Islamic financing structure, where an intermediary buysa property with free and clear title to it.
The intermediary and prospective buyerthen agree upon a sale price (including an agreed uponprofit for the intermediary)that can be made through a series of installments, or as a lump sum payment.Murabaha is not an interest-bearing loan, which is considered riba (or excess). Murabaha is an acceptable form of credit sale under Sharia (Islamic religious law). Similar in structure to a rent to own arrangement, theintermediary retains ownership of the property until the loan is paid in full.It is important to note that to prevent riba, the intermediary cannot be compensated in addition to theagreed uponterms of the contract.For this reason, if the buyer is late on their payments, the intermediary cannot charge any late penalties.

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