The terms ‘Bai-Murabaha’ have been derived from Arabic words ﺢﻳﺑ and ﺢﺑﺭ (Bai and Ribhun). The word ﺢﻳﺑ means purchase and sale and the word ﺢﺑﺭ means an agreed upon profit. ﺢﺑﺍﺭﻣﺍﺢﻳﺑ ‘Bai-Murabaha’ means ‘sale on agreed upon profit’.
"Bai-Murabaha" may be defined as a contract between a Buyer and a Seller under which the Seller sells certain specific goods permissible under Islamic Shariah and the Law of the land to the Buyer at a cost plus agreed profit payable in cash or on any fixed future date in lump sum or by installments. The profit marked-up may be fixed in lump sum or in percentage of the cost price of the goods.