Murabahah

Definition of "Murabahah"

(phr. bay` al-murabahah) Originally a term describing any sale in which the seller sells his merchandise for more than the price at which he acquired it, the term murabahah is now used in contemporary Islamic finance to describe a financing scheme in which a financial institution agrees to purchase merchandise for a client provided that the client promises to purchase it from the financial institution at an agreed upon mark-up. This transaction, called simply murabahah or murabahah financing, is widely used in contemporary Islamic finance.