Islamic finance in Europe (42)

Continuation

1.4.2 INDIRECT PARTICIPATION OR MARK-UP CONTRACTS

There are also forms of non-participatory financing.

These types of financing do not involve any PLS.

These are most often used in practice, particularly for:

-      consumer credit;

-      and short and medium-term financing.

The most popular forms involve:

-      murabahah (sale term);

-      and ijarah (leasing)

contracts.

Contracts of this type, which are also known as “trade-based” or “asset-based” contracts, entail a fee or a mark-up on the price of the goods that are bought with the funds supplied.

From the research paper of European Central Bank

(Authors: F.Mauro, P.Caristi, S.Couderc, A.D.Maria, L.Ho, B.K.Grewal, S.Masciantonio, S. Ongena and S.Zaher)