Murabaha (Cost-plus financing)

Murabaha, or cost-plus financing, is a financing method where a seller discloses the cost of an item to the buyer and adds a pre-agreed profit margin. The buyer agrees to pay this total amount, usually over installments, without paying interest. It is commonly used in Islamic finance to purchase goods or assets, aligning with principles that prohibit interest. Essentially, the buyer and seller agree upfront on the item's cost and profit margin, making the transaction transparent and compliant with ethical financial standards.