CIFE Murabaha & Ijara

Question 1

What is the definition of 'Murabaha' in Islamic finance?

Accepted Answer

A cost-plus-profit sale where the seller discloses the original cost and adds an agreed profit margin, with payment typically deferred

Answer

A leasing contract for physical assets

Answer

A profit-sharing joint venture

Answer

An interest-free loan for home purchase

Question 2

In a Murabaha home finance transaction, who must own the property before selling it to the client?

Accepted Answer

The Islamic bank must first purchase the property and take legal ownership before selling it to the client

Answer

The client purchases the property directly from the developer

Answer

A third-party guarantor holds the title

Answer

The government holds the deed until full payment

Question 3

What is 'Tawarruq' (Commodity Murabaha) and how is it used in Islamic banking?

Accepted Answer

A monetisation technique where a client buys a commodity on credit from the bank and sells it in the spot market for cash to obtain liquidity

Answer

A direct property purchase arrangement

Answer

A method of profit-sharing in agriculture

Answer

A type of Islamic pension product

Question 4

What distinguishes 'Murabaha' from a conventional loan in terms of Shariah compliance?

Accepted Answer

Murabaha involves a real asset purchase and sale with a disclosed profit margin, whereas a conventional loan charges interest on money lent

Answer

Murabaha charges a higher rate than conventional loans

Answer

Murabaha is essentially identical to a conventional loan in legal structure

Answer

Murabaha does not require any documentation

Question 5

In a Murabaha contract, what happens if the client defaults on deferred instalments?

Accepted Answer

The bank may impose penalties only if they are donated to charity (not retained as income), and may restructure but cannot charge compound interest

Answer

The bank charges compound interest on overdue amounts

Answer

The bank immediately seizes all assets of the client

Answer

No penalty is permissible under any circumstance

Question 6

What is 'Murabaha to the Purchase Orderer' (MPO) structure?

Accepted Answer

A client requests the bank to purchase a specific asset; the bank buys it, then sells it to the client on a cost-plus-profit deferred payment basis

Answer

The bank purchases assets speculatively without client instruction

Answer

The client buys the asset and then sells it back to the bank

Answer

A partnership where both parties choose the asset together