Murabaha Share Finance: Part 2

In part 1 of this article, we started to look at how a Murabaha share financing structure would work.

As a recap, we assumed a scenario where the bank is providing financing to the customer of £1,000, and the customer shall repay £1,050 in one year’s time. The bank will sell shares for £1,050 to the customer (payable in one year’s time), where the bank is acting on the customer’s behalf as the buyer.

Now, the customer has the choice to retain the shares (which is not really a practical option) or to sell the shares. Of course, the customer has already approached the bank for financing, and hence we can reasonably expect that the customer will decide to sell the shares. And, of course, he will expect to receive £1,000 (immed...