Murabaha — Bank Purchases Asset (Islamic Finance)
Bank purchases a commodity or asset from a supplier to sell it to the customer at a markup under a Murabaha contract.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Murabaha Inventory / Asset (Transitional) | Asset (+) | 100,000.00 | - |
| Cash / Supplier Payment | Asset (−) | - | 100,000.00 |
💡 Accountant's Note
In a Murabaha, the bank must genuinely purchase and own the asset before selling it to the customer. This purchase step creates a transitory asset on the bank's balance sheet. The asset must not be sold to the customer before the bank has taken ownership (no back-to-back same-day transactions without genuine ownership).
Practitioner & Systems Framework
💻 ERP Architecture
Islamic banking modules in Oracle FLEXCUBE Islamic (or dedicated systems like Path Solutions iMAL) handle Murabaha specifically. The asset purchase and sale are separate transactions in the system. Some CBJ-regulated Islamic banks use a commodity Murabaha structure on LME commodities to achieve a cash financing equivalent while maintaining Shariah compliance.
⚠️ Audit Flags
Shariah Board compliance review is mandatory. The bank's Shariah supervisory board must confirm that the asset purchase is genuine and that ownership risk (even if brief) is borne by the bank before the sale. Auditors verify that the profit rate is disclosed upfront (not variable) and matches the Murabaha agreement.
📄 Required Documentation
Supplier invoice and delivery confirmation, Murabaha agreement, Shariah Board approval/fatwa, customer's purchase offer, profit rate disclosure, and CBJ Islamic finance reporting schedule.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.