In Islamic finance, the fundamental requirement for Murabaha is that the seller must own the asset before it is sold to the buyer. This ownership ensures that the transaction avoids riba (usury) and aligns with the principles of trade, as endorsed by
In our Murabaha arrangement:
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Asset Ownership: The lender, acting as your financier, legally takes ownership of the asset (in this case, the car) through the legal financing agreement.
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Possession and Risk: Sharia emphasizes constructive or legal ownership rather than physical possession. Once the lender has legally acquired the car (even if briefly), the lender assumes constructive ownership and risk for that period.
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On-Sale to the Client: After acquiring ownership, the lender sells the car to you at an agreed-upon markup price, payable over a deferred period, which is the essence of Murabaha.
This process adheres to the key Sharia principle that the financier cannot sell what it does not own. By acquiring legal ownership through the contractual mechanism, the financier fulfills this obligation. This is conducted in a manner that conforms to both Sharia and Australian legal requirements.
Legal Framework: Practical Implementation
From a legal standpoint:
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The purchase and sale transactions are executed and documented meticulously to reflect Sharia compliance.
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This contractual arrangement satisfies the requirement of ownership under both Sharia principles and applicable legal frameworks.
Jurisprudential Endorsement
The practice of constructive or legal ownership has been widely accepted by contemporary Islamic scholars and institutions, such as AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions). They recognize that in modern financial transactions, especially where physical possession is impractical, legal documentation of ownership suffices.
Assurance of Compliance
Our Murabaha transactions are rigorously reviewed and certified by our Sharia Advisory Board (Global Islamic Financial Services – GIFS) to ensure full compliance with Islamic principles. Rest assured, we take every measure to adhere to the highest standards of Sharia in structuring and executing these agreements.