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Mourabaha
A Sharia-compliant sale transaction where the financier purchases an asset and resells it to the customer at a disclosed cost plus an agreed profit margin, with deferred payment. Unlike conventional loans, the bank takes actual ownership of the asset (however briefly) — this transfer of ownership risk is what distinguishes murabaha from an interest-bearing loan. Commodity murabaha (tawarruq) uses London Metal Exchange (LME) metals as the underlying commodity and is widely used in the GCC for corporate financing, interbank placements, and trade finance. It is the most common Islamic financing structure globally.
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Murabaha is a Sharia-compliant financing structure where a bank purchases an asset and resells it to the customer at a disclosed cost plus an agreed profit margin, with deferred payment. It avoids interest (riba) by structuring the transaction as a genuine sale with a markup rather than a loan with interest. It is the most widely used Islamic financing product, accounting for an estimated 80% of Islamic banking transactions globally.
In a conventional loan, the bank lends money and charges interest. In murabaha, the bank purchases the asset itself, takes ownership (however briefly), and resells it to the customer at a markup. The key difference is that murabaha involves a real sale of an asset, while a conventional loan involves lending money at interest. The bank bears ownership risk during the period it holds the asset — this risk transfer is what makes murabaha permissible under Sharia law.
Commodity murabaha (also called tawarruq) is a cash-generation technique where a bank purchases commodities (typically London Metal Exchange metals), sells them to the customer at a markup with deferred payment, and the customer then sells the commodities on the spot market for cash. It is widely used for corporate working capital, interbank liquidity management, and personal finance in the GCC. However, 'organised tawarruq' — where the commodity sale back is pre-arranged — is controversial among Sharia scholars.
Yes. France introduced specific tax provisions in 2009 to accommodate murabaha and other Islamic financing structures under French civil law. The double transfer of ownership is treated as a single financing transaction for tax purposes, avoiding double stamp duty and registration fees. This makes Paris a viable jurisdiction for structuring murabaha transactions — particularly for cross-border deals between Gulf institutions and European assets. GSDA advises on murabaha structuring under both French and GCC law.