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Islamic Finance by Keon Chee, Daud Vicary Abdullah

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AN INTEREST-BEARINGSYSTEM IN DISGUISE?

To some, it seems that BBA and murabahah are similar to conventional, interest-based financing. If the bank purchases a home for $100,000, and turns around to sell it to you at a marked-up price of $120,000 to be paid in monthly instalments, it would appear that we have merely substituted a mark-up profit rate for the rate of interest. In fact, the difference between the two may disappear if proper care is not exercised.

Certain conditions are thus imposed to ensure that BBA and murabahah financing are both free from riba and gharar.

Legal Relationships Are Set Up and Enforced

Like most Islamic finance contracts, BBA is constructed with several, separate legal relationships, each of which must be fulfilled ...

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