cost-plus financing

cost-plus financing
murabaha arrangements are commodity trading arrangements for financial institutions. The financial institution buys an asset from a supplier and then sells it to a customer at an agreed price that is higher than the purchase price. The sale price is fixed earlier between the financial institution and the customer and may be payable immediately or may be deferred for payment at a later date. The arrangement is not contrary to Sharia because by taking the title to the asset, the financial institution takes on a risk and is therefore entitled to a profit.
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Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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