Islamic banking and finance in the context of "Murabaha"

Islam is an Abrahamic monotheistic religion based on the Quran and the teachings of Muhammad. Adherents of Islam are called Muslims, who are estimated to number 2 billion worldwide and are the world's second-largest religious population, after Christianity.

Muslims believe that there is a primordial faith that was revealed many times through earlier prophets and messengers, including Adam, Noah, Abraham, Moses, and Jesus, and they believe that Islam is the universal and complete version of this faith. Muslims consider the Quran to be the verbatim word of God and the unaltered, final revelation. Alongside the Quran, Muslims also believe in previous revelations, such as the Tawrat (the Torah), the Zabur (Psalms), and the Injil (Gospel). They believe that Muhammad is the main and final of God's prophets, through whom the religion was completed. The teachings and normative examples of Muhammad, called the Sunnah, documented in accounts called the hadith, provide a constitutional model for Muslims. Islam is based on the belief in the oneness and uniqueness of God (tawhid), and belief in an afterlife (akhirah) with the Last Judgment—wherein the righteous will be rewarded in paradise (jannah) and the unrighteous will be punished in hell (jahannam). The Five Pillars, considered obligatory acts of worship, are the Islamic oath and creed (shahada), daily prayers (salah), almsgiving (zakat), fasting (sawm) in the month of Ramadan, and a pilgrimage (hajj) to Mecca. Islamic law, sharia, touches on virtually every aspect of life, from banking and finance and welfare to men's and women's roles and the environment. The two main religious festivals are Eid al-Fitr and Eid al-Adha. The three holiest sites in Islam are Masjid al-Haram in Mecca, Prophet's Mosque in Medina, and al-Aqsa Mosque in Jerusalem.

Muamalat (also muʿāmalāt, Arabic: معاملات, literally "transactions" or "dealings") is a part of Islamic jurisprudence, or fiqh. Muamalat has been defined as Islamic "rulings governing commercial transactions",but also more broadly to include civil acts and in general all aspects of fiqh that are not Ibadat, i.e. not acts of ritual worship such as prayer or fasting, (See organizational chart of the structure of Islam below in "Principles" section.)

Mu'amalat provides much of the basis for Islamic economics, and the instruments of Islamic financing, and deals not only with Islamic legality but also social and economic repercussions and the rationale of its prohibitions (according to Monzer Kahf). Even a broad definition of Muamalat does not deal with all aspects of property and money in Islam, as zakat — compulsory alms giving that is one of the five pillars of Islam — is part of Ibadat division of fiqh.

Riba (Arabic: ربا ,الربا، الربٰوة, ribā or al-ribā, IPA: [ˈrɪbæː]) is an Arabic word used in Islamic law and roughly translated as "usury": unjust, exploitative gains made in trade or business (especially banking). Riba is mentioned and condemned in several different verses in the Qur'an (3:130, 4:161, 30:39, and the commonly referenced 2:275-2:280). It is also mentioned in many hadith (reports of the life of Muhammad).

While Muslims agree that riba is prohibited, not all agree on what precisely it is (its definition). The term is often used to refer to interest charged on loans, and the widespread belief among Muslims that all loan or bank interest is riba forms the basis of the $2 trillion Islamic banking industry. However, not all Islamic scholars have equated riba with all forms of interest; nor do they agree on whether riba is a major sin or simply discouraged (makruh), or on whether it is a violation of Sharia law to be punished by humans rather than by God.

Ijarah, (Arabic: الإجارة, al-Ijārah, "to give something on rent" or "providing services and goods temporarily for a wage" (a noun, not a verb)), is a term of fiqh (Islamic jurisprudence) and product in Islamic banking and finance.In traditional fiqh, it means a contract for the hiring of persons or renting/leasing of the services or the “usufruct” of a property, generally for a fixed period and price. In hiring, the employer is called musta’jir, while the employee is called ajir. Ijarah need not lead to purchase. In conventional leasing an "operating lease" does not end in a change of ownership, nor does the type of ijarah known as al-ijarah (tashghiliyah).

In Islamic finance, al Ijarah does lead to purchase (Ijara wa Iqtina, or "rent and acquisition") and usually refers to a leasing contract of property (such as land, plant, office automation, a motor vehicle), which is leased to a client for stream of rental and purchase payments, ending with a transfer of ownership to the lessee, and otherwise follows Islamic regulations.