Murabaha is a commonly used Islamic finance structure in the Middle East for short and medium-term financing and lends itself to trade finance and consumer finance, where it is used to fund the purchase of assets.

It is also used to meet corporate working capital needs, fund acquisitions (eg of land or shares) and can serve as the basis for a deposit product.

Under a typical murabaha arrangement (also known as cost plus profit financing), the Customer provides an Islamic Financial Institution (IFI) with the particular specifications and purchase price of the relevant assets and asks the IFI to obtain the assets from a third party vendor (the Seller).

The IFI considers this request and pulls together any other information it requires and, if satisfied, purchases the assets from the Seller and then sells them to the Customer. The purchase price is made up of the original purchase price paid by the IFI to the Seller plus a pre-agreed mark up, both of which must be disclosed to the Customer by the IFI.