Short Term Murbaha

Murabaha is also frequently used in short-term trading, such as granting letters of credit to importers. A murabaha letter of credit is issued on an applicant’s behalf (importer). The bank that issued the letter of credit promises to pay a sum of money in accordance with the provisions of the letter of credit.

Murabaha has been the most prevalent financing mechanism among “Islamic” banks in today’s globe. Islamic banks use Murabaha to offer finance to their clients by purchasing things that their customers require and then selling them back to their customers on a deferred payment basis.