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Questions and Answers
What is included in the Murabaha price?
What is included in the Murabaha price?
The Payment Schedule indicates only one payment towards Murabaha price.
The Payment Schedule indicates only one payment towards Murabaha price.
False
What must be clearly stated in the Declaration regarding the Murabaha price?
What must be clearly stated in the Declaration regarding the Murabaha price?
The Murabaha price, which includes the Cost of Goods and Profit.
The Payment Schedule specifies the amount that the Client will make from time to time or at once towards the payment of the __________.
The Payment Schedule specifies the amount that the Client will make from time to time or at once towards the payment of the __________.
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Match the following terms with their definitions:
Match the following terms with their definitions:
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What is a critical aspect of Murabaha financing regarding the goods purchased?
What is a critical aspect of Murabaha financing regarding the goods purchased?
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Profit for the Murabaha transaction can be recognized before the goods are sold by the bank.
Profit for the Murabaha transaction can be recognized before the goods are sold by the bank.
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What are the two stages involved in a Murabaha transaction?
What are the two stages involved in a Murabaha transaction?
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A new Murabaha can only be executed for the purchase of __________.
A new Murabaha can only be executed for the purchase of __________.
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Match the responsibilities of a Relationship Manager with their descriptions:
Match the responsibilities of a Relationship Manager with their descriptions:
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Study Notes
Murabaha Price
- The Murabaha price (cost of goods + profit) needs to be clearly defined and stated in the agreement.
Payment Schedule
- This specifies how the client will pay for the goods, either in instalments or a lump sum.
Restrictions on Murabaha
- A new Murabaha can only be used to buy new assets.
- The same goods cannot be pledged or used as collateral for another Islamic bank loan.
Profit Recognition in Murabaha
- The profit is recognized after the bank sells the goods to the customer.
- There are two stages:
- Investment stage: bank buys the goods
- Financing stage: bank sells the goods to the customer.
Murabaha Documentation & Relationship
Relationship Manager Responsibilities
- Ensure the customer's needs and purchase process are understood.
- Verify the purchase process conforms to approved Murabaha procedures.
- Ensure agreement on the sale price, payment date, and other terms.
Stages of Murabaha
- Promise stage
- Credit approval
- Agency stage
- After execution of Murabaha
Stages of Murabaha Breakdown
- Credit approval (from Shari’ah perspective):
- This involves checking if the Murabaha transaction is compliant with Islamic law.
- All terms, including the sale price (cost plus profit), due date, and payment schedule, must be reviewed.
- The agreement must be viewed as a "Sale" transaction, where the lender buys goods and sells them to the client at a profit, not a financing agreement.
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Description
This quiz covers the fundamental principles of Murabaha financing, including pricing, payment schedules, and documentation requirements. You will learn about the profit recognition stages and the responsibilities of relationship managers in the process. Test your understanding of how Murabaha works within Islamic finance.
