Topic summary
Murabaha
Extracted from the Wikipedia article Murābaḥa.
Islamic finance, use, variations
But these involve risks of loss, profit-sharing modes of financing cannot guarantee banks income. Murabahah, with its fixed margin, offers the seller (i.e. the bank/financier) a more predictable income stream. One estimate is that 80% of Islamic lending is by murabahah. M. Kabir Hassan reports that murabaha accounts are quite profitable. As of 2005, "the average cost efficiency" for murabaha was "74%, whereas average profit efficiency" even higher at 84%. Hassan states, "although Islamic banks are less efficient in containing cost, they are generally efficient in generating profit."