View source for Murabaha to Purchase Order by Muhammad Mohsin Ahmed




== Top 20 FREQUENT WORDS ==
murabaha 52
customer 27
institution 27
goods 19
client 18
payment 17
agreement 16
agency 14
execution 14
supplier 13
price 12
acquiring 10
credit 9
purchase 9
risk 8
possesion 7
sale 7
stage 7
transaction 7
banking 6
buyer 6
financing 6
islamic 6
permissible 6
possession 6
shariah 6



== DOCUMENT KEY POINTS ==
*presented by mohammad mohsin ahmed at alhuda cibe workshop at avari hotel a karachi
*murabaha to the purchase orderer

*murabaha i murabaha is a particular kind of sale where the seller discloses its cost and profit charged thereon
*i the price in this sale can be both on spot and deferred

*banking murabaha i the product of murabaha that is being used in islamic banking as a mode of finance is something different from the murabaha used in normal trade
*i this transaction is concluded with a prior promise to buy submitted by a person interested in acquiring goods through the institution

*i it is a bunch of contracts completed in steps and ultimately suffices the financial needs of the client

*scope of murabaha i as it is a kind of sale there must be a seller and buyer and some thing that is bought and sold
*i it cannot be used as a substitute for running finance facility which provides cash for fulfilling various needs of the client

*i the transaction can be used in order to meet the working capital requirements however it cannot be used to meet liquidity requirements
*scope of murabaha i it is a fixed price sale and normally is done for short term

*after execution of murabaha
*agency stage i

*credit approval under shariah perspective points to be considered while approving credit i it is essential that the transaction between two parties must be genuine not fictitious and should exclude any prior contractual relationship between the customer and original supplier
*however revocation of prior contract between the supplier and the client can allow the institution to enter in murabaha

*credit approval under shariah perspective points to be considered while approving credit i the institution must insure that the party from whom the item is bought is a third party and not the customer or his agent
*in this manner the transaction can be saved from bai inah buy back which is not allowed in sharia

*credit approval under shariah perspective i nature of the business to be in scope of the murabaha
*i differed payment not permissible in case of gold silver and currencies

*credit approval under shariah perspective specified commodities study in respect of a uniqueness a pricing a active market a risk profile a cash flow analysis commitment fee not permissible
*after these consideration limit may be approved

*i at this stage the customer promises the institution to buy the goods which were acquired by the institute on his request
*continued i the client orders the institution to buy certain goods for him and sell him the same after acquiring

*i in case of breach of promise hamish jiddiyyah can be used to recover actual damage however it cannot be used for covering the cost of funds opportunity cost
*continued i if the supplier is nominated by the client himself guarantee for good performance can be demanded

*i the institution therefore appoints him as its agent which is also permissible in the first step of the transaction to identify and procure the goods on institution behalf
*agency stage i agency agreement is not the condition of the murabaha if the institution can make direct purchases from the supplier

*i if goods are acquired from third party the execution of agency agreement will be between the institution the third party
*i however according to sharia perspective it is preferable to appoint the agent other then customer

*global agency agreement when the purchase of commodity is not of consistent nature
*agency stage types of agency agreement

*i discount on acquisition of assets discounts from supplier if any would be passed on to the customer at the time of murabaha sale by reducing the cost of sales
*acquiring possesion i advance payment can be made to the supplier

*acquiring possesion i if there is a rise in prices and the amount escalates for which financing is availed than the transaction can only be executed if the bank has been informed and the bank subsequently accepts the same
*i the institution reserves the right to reject the purchases if made other then agreed price

*delay in supply from the supplier in case where specific time was allowed leads to the revocation of agency agreement
*acquiring possesion i change of commodity in the agency agreement can be done with mutual consent

*acquiring possesion rejection on ground of quality if the customer rejects the goods on ground of inferior quality before the execution of murabaha new quality can be acquired through new murabaha
*after execution of murabaha the bank will not be liable for any discrepancies

*i the forms of taking delivery or possession of items differ according to their nature and custo miss i the item must move from the responsibility of the supplier to the responsibility of the institution
*i it is obligatory that the point when the risk of the item is passed on by the institution to the customer be clearly identified

*i documentary evidence required at the time of possession before execution of murabahadelivery challan gate passes and sales tax invoices
*i murabaha payment to be made directly to the supplier by the bank

*i at this stage relation of a buyer seller comes into operation between the institution the client since the sale is effected on deferred payment basis the relation of debtor and creditor also emerges between them simultaneously
*execution of murabaha i customer as an agent confirms that goods have been purchased same are in his possession and that payment has been made to the supplier

*execution of murabaha i customer having received delivery of goods as per purchase requisition confirms that goods have been examined and are satisfactory in respect of quality and suitability for his use
*i the customer also releases the institution from any liability in respect of the goods in any manner

*after execution of murabaha securities against murabaha price i the institution may ask the customer to furnish a security to its satisfaction for prompt payment of the deferred price

*after execution of murabaha case of default i in the case of default by the buyer in the payment of price at the due date the price cannot be increased
*i however if he has undertaken in the agreement to pay certain amount for a charitable purpose he shall be liable to pay the amount undertaken by him

*issues in murabaha rebate in early payment i if the customer makes early payment and there is no commitment from the institution in respect of any discount in the price of murabaha than the institution has the sole discretion in allowing them the rebate
*rollover in murabaha i rescheduling is allowed but repricing is not allowed

*issues in murabaha buy back if under murabaha financing once the goods purchased by the client from the bank the same goods cannot be pledged hypothecated for raising finance facility from the islamic bank
*rebate on early payments i it is prohibited by shariah standards to give rebate to the client on early payment as under murabaha the price is fixed

*client and bank sign an agreement to enter into murabaha
*murabaha step by step murabaha financing

*client appointed as agent to purchase goods on bank s behalf bank client agreement to murabaha agency agreement
*murabaha step by step murabaha financing

*islamic bank bank client agreement to murabaha agency agreement disbursement to the client
*murabaha step by step murabaha financing

*risk in murabaha i title to assets transferred to the customer at the time of purchase i usually the customer then provides same or other assets as collateral
*i role of purchasing department is essential while customer is taking from various institutions banking murabaha facility


 ''Please note, This is an auto generated summary based on sentances position in the document and other factors''
== DOCUMENT WORD ANALYSIS ==
=== Main Category ===
: AlHuda Material\islamic banking


=== KeyWords ===
contract price sale asset financing lease client purchase ijarah payment profit musharakah lessee amount commodity housing agreement contracts ownership project



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== DOCUMENT REFERENCES ==


=== Number of Pages ===
43


=== Published Date ===
2016-09-17 00:27:37


== Full Document ==


[https://www.hodhood.com/en/HodHoodDocuments/IslamicFinance/IslamicBanking/Murabaha%20to%20Purchase%20Order%20by%20Muhammad%20Mohsin%20Ahmed.pdf Read the Full Document]


[[Category:Islamic Finance]]

[[Category: Islamic Banking]]