Impact of murabaha on the financial development of Islamic banks (A comparative analysis)

The concept of Murabaha in general; It relates to the contract between the bank and its customers, which is based on the subsequent addition to the first price of the goods and is implemented today in participation banks as "Murabaha to Purchase Orderer" (MPO). Murabaha process starts when a person wants to buy a product but does not have enough cash to buy this product then the person goes to the participation bank. In this case, the bank buys the pre-agreed product and sells it to its customer at a price higher than the first price that the bank purchased from the merchant. Murabaha is one of the most important methods in practice because it contributes to the development of the economy, financial growth of the participation bank, ease of implementation and reduction of risks. It is observed in the study that the Murabaha share is about 70% of the total financing of the participating banks. In this research, the concept of murabaha applied in participation banks and their effects on financial development of these banks discussed. At least the last ten years' annual financial report of Islamic banks used to measure the effectiveness of Murabaha. It also focused on the role of murabaha in increasing the financial growth of participation banks in Africa, Asia and Europe. In the study, it is concluded that the Islamic banks prefer the murabaha method. The reason for this is that the application and follow-up of murabaha is easy, its profit is fixed and the risks are low compared to other methods. In addition, murabaha is preferred by customers as it helps to provide the necessary liquidity. The most common mistakes about Murabaha are made by the employees of the Islamic banks. Because the bank employees do not have sufficient experience in Islamic financial transactions and Islamic banks do not offer enough training courses that provide them a high level experience in how to apply Islamic financing models in the banking sector.