Murabahah is a sale contract whereby the seller adds a markup with cost and discloses the amounts to the buyer. Islamic banks apply this concept to finance their customers on a short- and long-term basis. In fact, about 70 per cent of the total investments of the Islamic banks in Bangladesh is based on the murabahah concept. However, the application of this concept varies from bank to bank and product to product. Some of the practices face heavy criticism from different stakeholders. This research aims to identify the application of murabahah by the Islamic banks in Bangladesh in offering various investment products and compare these practices with the Shari'ah requirements of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and other reputed Shari'ah authorities. The research adopted a content analysis approach whereby the murabahah contract documents of all full-fledged Islamic banks in Bangladesh are examined. The research further conducted interviews of Islamic banking practitioners to establish the process flow of different murabahah-based investment products and conducted focus group discussions to validate the findings. The research finds the scope for improvements that the Islamic banks of Bangladesh may consider in achieving greater compliance with the AAOIFI Shari'ah standards. The research also proposes relevant recommendations for consideration of the Islamic banks of Bangladesh. The findings and recommendations of the research would be a reference for the Shari'ah governance functions of Islamic banks including the Shari'ah supervisory boards in identifying the potential weaknesses and to take steps in addressing those weaknesses

Following the U.S. Subprime Crises of 2007-08, many developed countries went into deep recession. In the literature, there are many reasons provided as probable causes of the crisis. However, it is undeniable that the flaws of the conventional financial system and home financing methods are among the important sources of the crisis. In this thesis, we argue that the damage caused by the Subprime crisis may have been avoided to a considerable extent if true profit and loss sharing (PLS) based method of financing has been applied. In that regards, we suggest an improved version of Islamic home financing called the Enhanced Musharakah Mutanaqisah (EMM). The original musharakah mutanaqisah (MM) home financing is based on a partnership between a customer and a bank in acquiring and taking ownership of a property while at the same time the customer rents the bank’s share of the property. Throughout the partnership period, the customer gradually acquires the bank’s share in the property ending up with full ownership at maturity of the contract. However, rather unfortunately, the current versions of MM home financing practiced by most of the Islamic financial institutions (IFIs) closely resemble conventional housing mortgage. When we scrutinize the contemporary versions of MM home financing, we find many controversial practices and compromises to underlying contracts’ original Shari’ah features. To overcome the controversies and to make the practice truly PLS based, we propose an improved version called the Enhanced Musharakah Mutanagisah (EMM) home financing. The main distinctive features of the EMM are the use of the rental prices or indices as benchmark for product’s revenue and the employment of the market value of the property as its price during share purchase. There are several other enhancements added in the EMM to remove most of controversial practices of current MMs and to make it a true partnership based home financing product.