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Murabaha

Murabaha is probably the most popular and widely used Islamic financing technique, perhaps because it is relatively simple to apply, certainly when compared to other Islamic financing techniques which, require more elaborate arrangements for their application. Murabaha involves the resale of a commodity, after adding a specific profit margin (often referred to as a ‘mark- up’) by the lender to the borrower who agrees to buy that commodity for the new offered price. Usually, repayment is made in installments to the financier, who pays the price to the original supplier of the commodity.