 In this module, we would look into different uses of murabaha, and it's not only this module, there would be quite a few modules to follow which would be looking into uses of murabaha in different Islamic banking and finance contexts. So there are various ways of using murabaha in Islamic banking and finance. It is used in retail banking, it is used in liquidity management, and even it has growing use in Islamic capital markets. In fact, murabaha is the most widely used mode of financing in Islamic banking and finance. Sometimes people tend to criticize the excessive use of murabaha in Islamic banking and finance, but in my opinion and the opinions of so many industry observers, this should not be a cause of concern because murabaha is actually a very useful tool to be used in financial intermediaries like Islamic banks. So in this module, we shall introduce some of the applications of murabaha in Islamic banking and finance. What could be the simplest uses of murabaha? Murabaha home financing, which is an Islamic retail banking product. So this is deemed as a plain vanilla use of murabaha in Islamic banking. Under this arrangement, a bank buys a house from a vendor from a third party, a home seller, and sells it to the customer by disclosing its profit. Remember, this is the basic characteristic of a murabaha contract. Murabaha comes from the word ribh. Ribh in Arabic means profit and murabaha means a sale contract, an arrangement between a buyer and a seller in which case the seller has to disclose its profit to the buyer. So the bank buys the house from a vendor and sells it to the customer for a disclosed profit. The customer has the facility to pay in monthly installments. So in this case, the murabaha is on credit. So there are two aspects, two characteristics of murabaha. This is murabaha with disclosed profit and it has some features of ba'a mo'ajal. This is what we have been emphasizing that Islamic modes of financing actually may not be just one contract. Islamic modes of financing, the way they are used in Islamic banking and finance, they are a combination of so many arrangements and the use of murabaha is not an exemption. Now what is the process of home financing based on murabaha? The customer identifies a house. Of course it identifies a house because it wants to purchase it. It then approaches an Islamic bank because it is looking for home financing. The customer is looking for home financing hence it approaches an Islamic bank or a conventional bank which offers Islamic home financing. If the bank accepts the application and it decides to move forward, it buys the house from the vendor for whatever be the price and sells it to the customer for as I said a disclosed profit. The customer starts paying monthly installments over a certain period of time. This is the simple process of murabaha based home financing. Let us go into these steps one by one to explain if there are any issues in these steps. So we have this customer who is a prospective home buyer and of course it has identified a home seller. Someone wants to sell the house. The customer has done this information. It has gone to the market to this place, that place and after searching for the right kind of property, it has actually identified the vendor and they have agreed on basic terms and conditions of the sale. The most important one is that the price is agreed between the customer and the vendor and this happens even before the customer has approached an Islamic bank. Some customers they might want to go to an Islamic bank even beforehand because they would like to check whether the Islamic bank would be willing to provide home financing. Now after the price is agreed, after the negotiations, the customer actually goes to an Islamic bank and applies for home financing. This application is a detailed document in which the bank would ask the customer about their identity, about their sources of income, of course their expenses and so on to assess credit worthiness of the customer. Once the bank is happy with the customer, it would accept the application and would inform the customer that we are willing to finance your home purchase. So this is in a way step number two. Now once the bank has informed the customer and the customer says, well, I'm very happy about it. I would like to move forward. The bank actually then requires the customer to sign a purchase undertaking. Why? Because if the bank has bought the house in anticipation of the customer buying it, buying the house from it and if the customer has changed their mind, then the bank would be left with this unwanted house. To avoid that kind of situation, the bank always asks the customer to sign a purchase undertaking which is binding on the customer once the bank has bought the property from the vendor. This purchase undertaking is based on the concept of VAD which we have previously explained. Now this purchase undertaking would give comfort to the bank. Then bank would make arrangements to buy the house from the vendor through a lawyer, through a solicitor. Once the bank has bought the house, then it would sell the house to the customer for a profit. And with this, the initial stage of the transaction would get completed. The customer would get the house. Hopefully, it would start living in the house, would start enjoying it, but at the same time, it would have to start paying the monthly installments of this Morabha financing. This is how Morabha is actually applied in the context of home financing. This use of Morabha is actually very genuine. The bank gets involved in the transaction and buys the house first before selling it to the customer. So this is a genuine purchasing and selling. This is a genuine trading in homes, trading in properties which is one of the characteristics of Islamic banking. Islamic banking claims to be trade based rather than just offering loans and credits to their customers.