Jurisdiction(s):
United Kingdom

Key definition

Murabaha definition

What does Murabaha mean? In legal practice, murabaha is an Islamic finance, cost‑plus sale used as a Sharia‑compliant alternative to an interest‑bearing loan: a financier acquires an identified asset and immediately resells it to the customer at cost plus a disclosed profit, payable on deferred terms (often instalments). The expression is descriptive rather than statutory; UK tax legislation typically refers to “alternative finance” purchase and resale arrangements and gives broadly debt‑like tax treatment, including relief to avoid double charges on back‑to‑back transfers for land transactions. Key features include: disclosure of cost and profit; two sales with the financier taking title (and interim risk) before resale;...

Murabaha Transactions: Step‑by‑Step Structure, Agency Options and Core Shari’ah Requirements for Valid Cost‑Plus Sales and Deferred Payment Financing

Published by a LexisNexis Banking & Finance expert

Practice notes

Murabaha

Murabaha ranks among the most widely used techniques in Islamic finance globally. This arrangement, often described as 'Cost plus profit financing', requires at least three participants. It is naturally suited to property finance, trade finance, and consumer finance transactions to support the purchase of assets. Beyond this, Murabaha can also (and frequently does) address corporate Working Capital needs, underpin deposit products, and act as a mechanism to generate cash flows. These arrangements are widely executed to finance the acquisition of defined assets.

In a typical structure, a customer (the Customer) requests a financier—usually an Islamic financial institution (IFI), such as a bank or fund operating in Islamic finance—to procure specified goods from an external supplier (the Seller). The IFI then buys the named goods from the Seller and resells those goods to the Customer. The steps involve the IFI buying, then selling on to the Customer. The amount payable by the Customer to the IFI equals the IFI's original purchase price from the Seller, plus a pre-agreed profit margin. Hence, it is commonly known as 'cost plus financing'...

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Web page updated on 21/05/2026

Popular documents

Using the Judicial College Guidelines to assess general damages in personal injury claims

When evaluating a general damages claim, the practitioner ought initially to refer to the Judicial College Guidelines (JCG)...

Tomlin orders in England and Wales: CPR guidance on drafting, confidentiality, approval, variation, enforcement, limitation, CCA issues, court-specific requirements, sample wording and precedents

This Practice Note This Practice Note reviews mechanisms used in settling litigation. A Tomlin order consists of a consent order paired with a schedule. It operates to stay proceedings on terms that have been agreed. The provisions contained in the schedule may remain confidential. This Practice Note describes the scope of confidentiality attaching to the schedule and sets out how it differs from a standard consent order. Sample wording for a Tomlin order is included, alongside links to precedents, as well as guidance on court approval. It also addresses varying, setting aside and enforcing a Tomlin order, including the considerations the court will take into account when handling applications for each. Further guidance is provided on interpreting and applying the relevant provisions of the CPR; however, some courts and divisions impose very specific requirements for both drafting and approval, and for approaching the schedule and confidentiality issues. Accordingly, you must consider the particular rules and court guide provisions in the forum where your claim is proceeding when drawing up the Tomlin order...

Precedent: Deed of Surrender of Lease with Optional Premium, Settlement and Release, Landlord, Mortgagee and Guarantor Consents, Reimbursement and HM Land Registry Provisions (England and Wales)

Date [ date ] Parties [ name of Landlord ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Landlord) [ name of Tenant ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Tenant) [ [ name of Guarantor ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Guarantor) ] [ [ name of Mortgagee ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Mortgagee) ] Definitions Within this Deed, the terms below shall be interpreted as follows: [ Annual Rent • the annual sum reserved under the Lease; ] [ Insurance Rent • the Tenant’s share of the Landlord’s costs of insuring the Property (as set out in the Lease); ] Lease • the lease of the Property dated [ date ], entered into between (1) [ the Landlord OR [ name ...

Precedent Statutory Declaration: Standard Wording under the Statutory Declarations Act 1835

I, [ name ], of [ address ], solemnly and sincerely state that: [ Matters to be verified, set out in numbered paragraphs ] I make this solemn statement in good conscience, believing it to be true, and pursuant to the provisions of the Statutory Declarations Act 1835. DECLARED at [ details ] this [ day ] day of [ month and year ] Before me ................................................................................ [ signature of the person before whom the declaration is made ] A [ commissioner for oaths OR [ solicitor OR [ insert other qualification ] ] authorised to administer oaths ]...