Islamiat MCQ #17639

According to Islamic finance, the key difference between Murabaha and a conventional loan is:

Islamiat MCQ #17639

  1. Question 1

    Q1. According to Islamic finance, the key difference between Murabaha and a conventional loan is:

    • A) In Murabaha the bank buys and sells a real asset, whereas a conventional loan is purely a monetary transaction
    • B) In Murabaha the profit rate is always lower than a conventional loan interest rate
    • C) In Murabaha the repayment period is shorter than that of conventional loans
    • D) In Murabaha the bank bears all financial risk whereas a conventional loan transfers risk to the borrower

    Answer: In Murabaha the bank buys and sells a real asset, whereas a conventional loan is purely a monetary transaction

    Explanation: Murabaha involves the bank purchasing a real asset and reselling it at a disclosed profit margin, creating a genuine sale transaction, whereas a conventional loan is a pure monetary exchange with interest.