Bai' Bithaman Ajil

A sale where the price is agreed at signing but paid later, in a lump sum or installments. The deferred price may exceed the cash price, which the majority of scholars permit because the increase is part of a sale price for a real asset, not a charge for lending money. Once fixed, the price cannot rise if the buyer pays late.

Bai' Bithaman Ajil (BBA) is the generic deferred-sale structure; Murabaha is the version where the seller also discloses its cost and markup. In Malaysia BBA was the dominant home financing contract for decades; in the United States the same economics appear inside Murabaha home and auto financing.

The permissibility of a higher deferred price is one of the most important rulings in Islamic finance, because without it there would be no installment financing at all. The majority of classical jurists in all four Sunni schools allowed a seller to quote one price for cash and a higher one for deferred payment, provided the buyer commits to one price at signing; what is forbidden is leaving the price open so that it increases with time after the contract, which is riba al-nasiah.

That is why a halal financing contract states a single total price and a schedule, and why a compliant late fee cannot be a percentage added to the balance. Critics argue a deferred price that tracks market interest rates is interest by another name; defenders answer that the pricing benchmark does not change the nature of the contract, which is a sale of a real asset the seller actually owned.

U.S. consumers meet BBA economics in Murabaha auto and home financing: the provider buys the car or house, sells it to you at a fixed deferred price, and the contract is enforced under state sale and installment law. When you compare that fixed price to a conventional loan, remember the loan's total cost is a projection that changes if rates reset or you pay late, while the Murabaha price is a ceiling.