Many people know Islamic mode of transactions from modern Islamic banking practices. They oftenly define every transaction based on their experience in dealing with Islamic banking. While there are many modifications are made to fit in financial transaction, such definition definitely contain additional elements that are not available in original term.
For instance, many people now define Murabaha as “sale with installments”. This defiition is certainly misled by practice in Islamic banking, in which customers are fasicilitated to pay his sale-based debt by the way of installment. The original definition would be “a sale in which the original price is known and profit is agreed by both parties”. In old times, Murabaha is a cash-and-carry transaction, which means the commodity is paid fully when it is delivered. It is modern financial practice that adds installment practice to Murabaha so that it is known to people as “sale by the way of installment”.
Many people also consider other condition such as down-payment in Murabaha as a normal condition. Such an advance payment originally does not exist in Murabaha. However, banking tradition require a customer to provide a portion (usually one third) of the price as guarantee that he/she is serious with the transaction. Actually this condition is a mirror-image of self-financing requirement in conventional finance.
Most of people are unaware that Islamic mode transaction are having been practiced in their everyday life. What they do not know is that those practices have their own concept/term in Islam. The follwong instances are some of them.
- A man (A) sees his friend (B) using a bag which he (A) likes so much. So he asks B to buy for him from the store that sells such a bag, but he wants a different color. B will buy the bag with the condition that A will give him additional payment for cost of transportation. This is an example of Murabahah, with the purchase orderer.
- A family plan to have wedding ceremony for their daughter and order from a rental agent a package of wedding instruments such as chairs and tables, as well as food. The agent asks for a downpayment and they agree to pay half of the price, while the rest will be paid after the ceremony. This is an example of istisna’, a sale in which commodity(ies) are delivered later with payment mode is based on agreement
- Somebody comes to a tailor and says that he wants to have a new suit. The tailor ask him whether he has his own stuff to be sawn. He says he prefers to have the tailor cloth collection so that he can choose if any. So the tailor open the cupboard and show him his collection. Having chosen his favorit, the man is then measured for his new suit and agrees to pay a downpayment to the tailor. He will come after 3 days for fitting and pay another sum. Finally he will come for collecting the suit and settle the rest of his dues.-- This is a clear example of Istsihna, while if the man brings his own cloth then the contract will be closed as Ijarah a contract in which a work is exchange for money.
Continued
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