Murabaha (deferred purchase agreement)

The Murabaha is s common Islamic financing technique for the acquisition of assets. In effect the Murabaha is a purchase agreement which defers payment of the purchase price.
The financier purchases the asset and sells it to the customer at a profit pursuant to a purchase agreement. The purchase price (i.e. cost plus profit) is then paid on a deferred payment basis. There are many variations of the Murabaha, including for example where the asset is purchase by the customer acting as the agent of the financier. Under the Murabaha, the financier receives profit which is based on a fixed rate of return.