Murabaha is a sale contract , between a buyer and a seller, by which the latter buys the assets required by a buyer and resells them to it at a price increased by a margin determined clearly and explicitly. Profits (profit margin) and the repayment period (generally installments) are specified in the initial contract. This allows a customer to purchase an asset without taking out a loan with interest. And unlike the system of the conventional system, Murabaha plans a double transfer, with a financier who is owner of financed asset.
The conditions of sale such as the profit margin for the seller or the details of repayment of the installments are preset between the different parties.
There are two categories of sales in the form of Murabaha: in the first, the Islamic bank buys the assets, and makes them available to its buyer customers , without having received, in advance, the promise from the customers that they would actually buy these assets; in this case, we speak of Murabaha; the second category involves the promise of customer to actually buy the asset from the selling bank,; in this case, we speak of Murabaha accompanied by a purchase order. In the second case, the Islamic bank usually gives the customer a credit facility Murabaha whose deferred settlement is made by periodic increments.