Murabaha is a type of trust-based sale (buyu al-amana) whereby acquisition of assets is financed on short or relatively long term basis. The contract of murabaha (aqd al-murabaha) is entered into between a seller and buyer on cost plus mark-up basis. Payments are made either on a deferred or cash basis (deferred murabaha or cash murabaha).
The Islamic bank (as the seller) may request the purchase orderer or the buyer to make a down payment/ earnest money (arboun) at the contract date. This payment may be forfeited by the Islamic bank if the purchase orderer/ buyer opted for premature termination of the contract.
However, it is impermissible for the seller to request the down payment during the contractual stage at which the purchaser orderer/ buyer has given a promise (wa’ad) to purchase. In the event that the customer revokes a contract associated with down payment, it is commendable that the seller, after covering actual damage from the down payment, refunds the remaining amount of down payment to the murabaha buyer. The damage captures the difference between the cost of the item (object of murabaha) borne by the seller and the price (thaman al-murabaha) at which the item is assumed to be sold to a third party.
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