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Murabahah to the Purchase Orderer (MPO)
Murabahah is one of the most widely used instrument for Islamic financing products across the globe. Murabahah is the sale of a commodity at a price that includes a set of profit of which both the seller and the consumer are aware of.
In Short
- A sale based product under the Shariah contract of Murabahah.
- Adding mark-up to the cost of goods.
- Both the seller and the consumer are aware of a set of profit.
- The client must purchase products or assets.
- The required products must be Shariah compliant, its end use will also be Shariah compliant.
- Usually short-term finance.
Salient Features
- This is a mode of finance generally used for short-term finance requirement of the client.
- Client may place an order to purchase goods by the bank and committing to buy the same from the bank.
- The bank must purchase the goods as per specification of the Client to acquire ownership of the same before signing the Murabahah agreement with the Client.
- The bank may authorize any third party to buy and receive the goods on Bank's behalf. The authorization must be in a separate contract.
- Agreed price will include the cost price and profit. Bank must disclose the cost price and profit.
- The price once fixed as per agreement and deferred amount cannot be further increased.
- It is permissible to take cash / collateral security to guarantee the implementation of the promise or to indemnify the damages.
- Stock and availability of the goods is a basic condition. Bank must purchase the goods to acquire ownership.
- After purchase, the bank must bear the risk of goods until delivered.
- Bank must ensure delivery of the specified goods to the client on specified date and at a specified place.
Following products are available under MPO
Segments |
Products |
---|---|
Corporate |
MPO-Local, MPO against TD, MPO-EDF, MPI (Murabahah Post Import), etc. |
SME |
MPO-Local, MPO against TD, MPO-EDF, MPO-Business Solution, MPO-Fleet Financing, MPO-Krishi Finance, MPI (Murabahah Post Import), etc. |
Retail |
MPO-Term Executive, MPO-Term Women, MPO-Fast Finance, etc. |