In Islamic finance, murabaha is a contract of sale in which the seller and buyer agree on the seller's cost and profit.
also bai bi thamin al ajil, sales with a profit mark-up. This term has come to mean both spot and deferred payment sales engaged in by Islamic banks and is often used as a form of installment credit.
(Cost-Plus Financing): Sales with a profit markup. This term has come to mean both spot and deferred payment sales in which Islamic banks engage.
cost-plus or mark-up
sale at a percentage mark-up
Literally this means a sale on mutually agreed profit. Technically, it is a contract of sale in which the seller declares his cost and the profit. Murabaha has been adopted by Islamic banks as a mode of financing. As a financing technique, it can involve a request by the client to the bank to purchase a certain item for him. The bank does that for a definite profit over the cost which is stipulated in advance.
Murabaha is defined as a particular kind of sale, compliant with shariah, where the seller expressly mentions the cost he has incurred on the commodities to be sold and sells it to another person by adding some profit or mark-up thereon which is known to the buyer. It is one of the most popular modes used by banks in Islamic countries to promote riba-free transactions.