BBA, Bai Bithaman Ajil is deferred payment sale in Islamic finance. A shariah principle made popular by Malaysia, it’s a variation of murabaha except that the asset that is bought and sold can be any asset owned by the obligor and the asset’s cost doesn’t have to be disclosed. In BBA, the obligor sells an asset to the financier, and almost simultaneously buys it back at a marked-up price which he pays over a period of time. This concept has bai inah element, or simultaneous buying and selling by the same parties. BBA attracts controversy due to the inah element and the fact that you can take any asset to effect the transaction to give rise to a debt. Hence, the accusation that the BBA profit resembles interest. Though BBA is the predominant shariah principle in Islamic finance, Bank Negara has been encouraging practitioners to move away from BBA. Interestingly, tawarruq, which originated in the Middle East has become very popular but which some say is conceptually a BBA but with 3 parties. The obligor buys on credit but sells on spot to effect a financing obligation. Commodities are mainly used as the underlying asset. Question arises why an obligor has to buy commodities when he needs to finance, say a factory?
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