Murabaha Share Finance: Part 3

In part 1 (which can be read HERE), we started to look at how a Murabaha share financing structure would work. In part 2 (HERE) we completed the structure and also started to look at what it means to involve real assets - in this case, shares.

As a recap, this is the structure that we ended up with:

In reality, the structure used by any specific bank for Murabaha share financing may differ from this, however from my experience this is not often the case. If there is any departure from this, it will not be meaningful.

Once we concluded that we needed the 3 parties working together in this manner, we began to raise some issues around the risk surrounding these transactions.

When a bank gives a loan to a customer, the only risk it really wants to face is the...