Mohammed needs money in order to buy a latest Villa. The cost of building the Villa is BHD 75,000. His wife, Mariam, has savings up to BHD 20,000 and needs additional financing of BHD 55,000. Mohammed knows that he can always borrow from any bank in Bahrain but he wants a Shariah compliant financing. And he aware about the basic conditions for the validity of sale is that the commodity must be in existence, seller must own commodity and the seller must have physical possession of commodity and Mohamed is not aware about the exceptional product in Islamic Banking so Mohammed seeks your advice on a number of issues before he can make his decision on which financing best suit his needs i.e

Q 1: MURABAHA CONTRACT

One of Mohameds Islamic contracts alternative is to sign murabaha contract so discuse how Murabaha differs from conventional bank lending.

Answer the following questions for both a conventional bank loan and Murabaha. (Critically analyze the following questions)

a. Examine the key areas of concern of conventional bank loan and Murabaha in todays banking system.

b. How would you categorize the bankcustomer relationship in conventional bank loan and Murabaha?

c. Are there any guarantees in conventional bank loan and Murabaha?

d. What happens if the borrower defaults?