Musawama (bargaining sale) is a type of sale (ba’i or bay’) in which the cost price is not disclosed or referred to. In other words, the seller is not obligated to reveal the original cost of the commodity being exchanged to the buyer. Hence, the price to be agreed on is potentially subject to bargaining powers of both parties.
On the other hand, murabaha (cost-plus sale) is a special type of the so-called trust-based sales (buyu’ al-amana). Murabaha necessitates that the seller reveals to the potential buyer the exact cost price of the object of sale. The two parties, then, agree on the transaction’s mark-up (profit/ ribh) that will be added to the original cost, with both forming the murabaha price (thaman al-murabaha).
In a nutshell, when the cost price is concealed to the buyer, the sale is referred to as musawama. But if it is disclosed, the sale is called murabaha.
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