The Validity of Bay’ al-Murabahah: Transparency in Selling Price and Profit Margins #

Original Question: Can a seller, in a straightforward manner, inform a potential buyer of the item’s initial cost and the profit that the seller would be taking on top of the cost?

This type of sale, in which a seller would inform a buyer of the item’s cost price along with its profit margin, is known as “bay’ al-murabahah”.

While this type of sale is commendable for its honesty and transparency, it may also present some issues for the seller.

This is because when a buyer learns about the cost price, they might aggressively bargain to reduce the selling price as low as possible.

Nonetheless, if both the buyer and seller agree to the selling price after knowing about the cost price and profit margin, the sale and purchase agreement is valid as per other permissible shariah contracts.