Bai Al-Muajjal is a contract between a Buyer and a Seller under which the Seller sells certain specific goods permissible under Islamic Shari‘ah and Law of the land to the Buyer at an agreed fixed price payable at a certain fixed future date or within a fixed period in lump sum or by fixed instalments. The seller may also sell the goods purchased by him as per order and specification of the Buyer. In the case of Bank, Bai-Muajjal is treated as a contract between the Bank and the Client under which the Bank sells the goods(purchased as per order and specification of the Client) to the client at an agreed price payable at any fixed future date in lump sum or within a fixed period by fixed instalments.
Types of Bai-Muajjal
- Bai-Muajjal Corporate
- Bai-Muajjal SME
- It is permissible for the Client to offer an order to purchase by the Institution, particular goods deciding its specification and committing himself to buy the same from the Bank on Bai-Muajjal i.e. deferred payment sale at fixed price.
- It is permissible to make the promise binding upon the Client to purchase from the Institution, that is, he is to either satisfy the promise or to indemnify the damages caused by breaking the promise without excuse.
- It is permissible to take cash / collateral security to Guarantee the implementation of the promise or to indemnify the damages.
- It is also permissible to document the debt resulting from Bai-Muajjal by a Guarantor, or a mortgage. or both like any other debt. Mortgage / Guarantee / Cash security may be obtained prior to the signing of the Agreement or at the time of signing the Agreement.
- Stock and availability of goods is a basic condition for signing a Bai-Muajjal Agreement, Therefore, the Institution must purchase the goods as per specification of the Client to acquire ownership of the same before signing the Bai-Muajjal Agreement with the Client.
- After purchase of goods the Bank must bear the risk of goods until those are actually delivered to the Client.
- The Institution must deliver the specified Goods to the Client on specified date and at specified place of delivery as per Contract.
- The Institution may sell the goods at a higher price than the purchase price to earn profit.
- The price once fixed as per agreement and deferred can not be further increased.
- The Institution may sell the goods at one agreed price which will include both the cost price and the profit. Unlike Bai-Murabaha, the Bank may not disclose the cost price and the profit mark-up separately to the Client.