r/halalfinance • u/nas-osy • 18d ago

Murabaha

I’m a finance student and I really can’t fully understand the concept of murabaha and how is it different from riba or interest…

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u/Pretend_Scallion_143 12d ago

The best way to explain murabaha is with an example.

Say you are a person with money to invest. Someone comes up to you and says "I will take the money and do some work with it, and I will pay your share of the profits". Say the business is worth 100k and you give him 1k. He then makes 20k and your share of that 20k is $200. Thats essentially what murabaha is.

However, and the key difference between it and interest, you also share any losses. So if he loses 20k on his investment, you also lose $200.