Praise be to Allah; and may His blessings and peace be upon our Prophet Mohammad and upon his Family and Companions.
Murabaha means selling an object while informing the purchaser of its original price and the profit he (seller) is getting in this deal. Ash-Shirbini said: “ Murabaha is valid..e.g. he buys an item for a hundred while informing the purchaser of that, then sells it to him for two hundred, or the same price, or for a dirham against each ten. “ {Moghni al-Mohtajj, vol.2/pp.476/2}. Murabaha is a form of sale which is permissible by unanimous agreement of the Muslim scholars. Almighty Allah Says (What means): “ but God hath permitted trade and forbidden usury.“ {Al-Baqarah/275}.
Ibn Qodama said: “This transaction is undisputedly valid, and we don`t know of any scholar that regards it reprehensible.“ {Al-Moghni, vol.4/pp.136}. Therefore, this form of sale has been employed by Islamic banks in their different transactions. In common sales, the purchaser isn`t informed of the commodity`s price, so he isn`t aware of the profit the seller is making out of this transaction, unlike the case in Murabaha where the purchaser is informed of the price and agrees with the seller on the profit.
As regards the difference between Murabaha and usury, there are several aspects:
First: Murabaha is selling a commodity with an increase, or a decrease in its price; whereas, usury is offering a loan with an increase pertaining only to the money. This is because Islam regards the money as a medium and not a commodity; while Capitalism regards it as a commodity.
Second: The seller in Murabaha purchases the commodity, possesses it, becomes liable for it, then sells it to the purchaser in cash, or by installments, so he is held responsible for the item that he had purchased before selling it and delivering it to the buyer. As for a usurer, he gives a loan to someone else, so that the latter buys whatever he needs. Thus, the usurer doesn`t buy the item, or possess it, or be liable for it, and so he isn`t responsible for it in any way, and here lies the difference between Islamic and non-Islamic transaction.
This difference has rendered the profit made by Islamic banks permissible because it results from a process of selling, possessing and guaranteeing. Meanwhile, it has made the interests collected by non-Islamic banks unlawful because it is only received against the lending process itself.
Third: No increase is added to the profits of Islamic banks during the installments repayment period in Murabaha transaction since the percentage of the profit is fixed; whereas, in contracts of usury-based loans, the percentage of the interest varies because there is a condition which stipulates that it is amenable to change during the installment repayment period.
Fourth: Murabaha is a sale that involves the movement of a particular commodity, and this accelerates the economic progress of society; whereas, usury is mere leasing of capital, and it hinders the progress of economy. And Allah Knows Best.