How do Murabaha and Wakala work in practice when I finance stock?

One facility, three agreements, not two products

Murabaha and Wakala are two of the three agreements that make one Shariah-compliant facility.

The first is a master program agreement between the financier and your anchor. It gives the financier the right to buy goods from the anchor. No goods move under it, and you are not a party to it.

The second is the Wakala, an agency agreement. The financier is the principal and you are its agent, for one limited purpose: receiving delivery of goods the financier has bought, and holding them in custody.

The third is the Murabaha, a cost-plus sale: the financier sells you the goods at its disclosed cost plus a disclosed profit, payable later. A fresh Murabaha is signed for every consignment.

What happens, in order

You ask for a consignment to be financed, identifying the goods. You then give a binding promise to buy them at the disclosed cost-plus price. It is irrevocable and comes before anything is bought: if you walk away afterwards, the financier can recover what it actually loses on disposing of the goods.

The financier buys the goods from your anchor and pays for them. Ownership and the risk of loss pass to the financier: it must own the goods before it can sell them to you.

Your anchor delivers, and you sign for the goods as the financier’s agent under the Wakala. Until the sale completes they are the financier’s goods in your custody: you cannot sell, pledge or move them.

The sale completes when you take physical possession of the goods in your own right. At that moment title and all risk pass to you, before you have paid anything. You insure the goods from then on, and your payment obligation starts. You pay the contract price on the deferred date or dates.

The price, and why it is fixed

The price is the financier’s cost plus a profit, both disclosed before you commit. The profit is fixed when the sale is struck: it does not grow with time, nothing accrues while you wait to pay, and cost plus profit is the most you will ever owe.

If you pay late

The price does not grow, but late payment still has consequences: the financier may recover its actual, documented direct costs of the delay, and you undertake to pay a separate charity sum on the overdue amount into a segregated charity account. Neither is the financier’s income. Under the documented terms, your program sets how the charity sum is worked out.

If you pay early

No penalty and no fee. The financier may give a rebate, but it is voluntary and you have no right to one, because a guaranteed rebate would put time back into the price.

What you still owe

You are liable to pay the full contract price on the deferred date whether or not you have sold the goods. Security is taken, and it must be registered before the goods are delivered. If you default, your anchor suspends further credit supply until you are current again.

Shariah approval is the financier’s own board’s; the platform certifies nothing about it, and not every financier can offer this structure.