Reverse murabaha

From ACT Wiki
Revision as of 01:25, 5 March 2021 by imported>Doug Williamson (Classify page.)
(diff) ← Older revision | Latest revision (diff) | Newer revision → (diff)
Jump to navigationJump to search

Islamic finance.

Reverse murabaha is an Islamic finance instrument that is used to obtain cash immediately.


It is similar to a standard murabaha structure, but with an extra leg.

The standard part of the structure involves the bank buying the commodity from a goods supplier and selling it on to its customer on a deferred payment basis.

The extra step involves the customer selling on the commodity (usually back to the original goods supplier) against immediate cash payment.


The customer is left with cash in hand and a deferred payment liability to the bank.

In addition to credit risk on the customer, the bank also takes on asset risk and third party risk of the supplier reneging on the supply agreement.


Reverse murabaha is also sometimes known as 'tawarruq' or 'monetization'.


See also