01 Multiple choice — 12 questions
One attempt per option. A correct answer locks the question and explains itself; a wrong one only disables that option, so you can keep trying. The running score sits at the bottom of the page.
02 Written questions — 5 questions
Answer each in full before opening its model answer. The model answers are written at the length a full-mark response needs.
1. Explain Murabaha as practised by Islamic banks, element by element and in order.
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Murabaha is a cost-plus sale in which the seller fully discloses the original cost and the markup. Today it involves three parties — customer, bank and original seller.
1. The promise: the customer asks the bank to buy a specific item and promises to buy it. Before the first contract it is not legally binding, and the bank may not take any money — “don't sell what you don't have.”
2. The first contract: the bank buys from the seller and must fully own the commodity through its purchase order, checked before the second contract. The promise now binds: the customer buys or pays compensation.
3. The second contract: the bank sells to the customer at cost plus a disclosed, fixed markup, paid in installments, with no increase for late payment. “Promise, Purchase, Profit” — swap the order and the deal fails the ownership condition.
2. State the five conditions of Murabaha's second contract.
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a. Agree: both parties agree on cash or deferred payment, and the price is specified.
b. Bundle: the installment profit is part of the price, not listed as interest separate from the base price.
c. Freeze: if payment lags, the buyer pays nothing beyond the agreed installments.
d. Avoid: the goods are not items that must be exchanged hand-to-hand, like gold or dates, because Murabaha defers all or part of the price.
e. Secure: the bank may protect its rights with a guarantee or a mortgage.
3. List the seven conditions of a sale and explain which one Murabaha turns on.
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(1) Mutual consent; (2) legal capacity — mature and of sound mind; (3) legal permissibility — the item has recognised, lawful value; (4) ownership — the seller owns the goods at the time of the contract; (5) deliverability — physically or legally; (6) knowledge — goods and price clearly specified; (7) execution — the contract takes effect immediately. “Can Legal Owners Deliver Known Items Now?”
Murabaha turns on ownership: a bank that sells before it owns breaks it, which is why the bank must buy first and may take no money at the promise stage.
4. Define the direct installment sale, give its ruling and evidence, and explain when it would become riba.
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A direct installment sale is selling with a markup over the initial price in exchange for delayed payment or payment in installments — for example 50,000 riyals cash or 60,000 riyals over a year.
It is permissible on condition that the price is fixed. The evidence is the hadith in Sahih al-Bukhari: “Whoever pays in advance the price of a thing to be delivered should pay it for a specified measure and a specified weight for a specified period.”
The extra is part of a sale price fixed at the contract; it becomes riba only if the debt grows because payment is late.
5. Compare the direct installment sale with Murabaha.
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Parties: two (seller and buyer) vs. three (customer, bank, original seller).
Contracts: one sale vs. a promise plus two sales.
Cost disclosed: not required vs. cost and markup disclosed.
Shared rule: in both, the price is fixed at the contract and does not increase for late payment.