What Is Murabahah in Short?
Murabahah is a sale at cost plus a known, mutually agreed profit margin. The seller buys and actually owns the asset, then sells it to the buyer at a higher pre-known price paid in installments. The profit here is the return of a real sale, not the yield of a cash loan - and that is the essence of its lawfulness.
The On-Chain Mechanism, Step by Step
In the Qist protocol the process runs in clear stages. First, the seller deposits ETH or cbBTC into the smart contract, becoming the owner of the asset inside the contract. Second, the buyer commits to purchase under conditions written in code. Third, the buyer pays in USDC in installments at a fixed total price. Fourth and finally, once repayment completes, the asset is delivered to the buyer automatically. No bank, no human intermediary - the smart contract alone enforces every term.
The Real-Ownership Requirement
The governing shariah rule: "Do not sell what you do not possess." The seller must genuinely own the asset before selling it - not merely a promise or a cash financing. Actually depositing the asset into the smart contract before the buyer commits is what makes this a real sale, not a trick around an interest loan. Ownership and risk rest with the seller until the moment of delivery.
Fixed Installments and a Grace Period
The total price is set and fixed at the moment of contract and never changes with late payment - unlike a riba loan whose charges compound over time. Qist grants a grace period out of mercy to a struggling buyer before any action. And should the asset ever need liquidation, any surplus over what is owed is returned in full to the buyer, because the profit is proportional only to the installments actually paid.
Why It Is Halal and an Alternative to Riba Loans
Riba is an increase on a cash loan for time alone, with no asset and no risk. Murabahah profit, by contrast, is the return of a sale of an asset the seller owned and bore risk on. No riba, no gharar; the price is known and fixed, and surplus is returned. Thus Qist offers a practical, halal alternative for anyone who wants to finance the purchase of an asset without falling into an interest-bearing loan.
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Educational content only - not financial advice.