A Primer on Murabaha Arrangements from Money Jihad Blog
Money Jihad blog has posted two important articles over the past week regarding the Shariah-compliant alternative to conventional financing known as murabaha.
One thing to remember about murabaha is that, almost invariably, these arrangements cost the borrower more than conventional financing would. Money Jihad compares murabaha to “rent-to-own” deals in the US. We think the comparison is valid and Money Jihad goes on to explain key differences between the two, especially this aspect of murabaha:
There is no fundamental effort by rent-to-own sellers to introduce an alternative set of orthodox religious financial laws to Western markets in order eventually to replace them.
And unlike rent-to-own deals in the US, murabaha arrangements are used for large purchases, such as houses…
In addition to the basic introduction to murabaha, Money Jihad followed up with an illustration of how a Shariah mortgage works, including the fact that a portion of the proceeds go to zakat, and all-too commonly jihad. This of course makes Shariah-Compliant Finance unique and troublesome to non-Muslims around the world.