Revenue-Based Financing: A Promising Alternative Investment with Murabaha and Wakala Models

In today’s competitive business landscape, small and medium-sized enterprises (SMEs) often face challenges securing liquidity to meet working capital needs. Revenue-based financing (RBF) offers an innovative solution, allowing businesses to convert future receivables into immediate cash flow. Two key Sharia-compliant models in this domain are Murabaha and Wakala bil Istithmar, both of which provide businesses with much-needed liquidity without resorting to traditional loans.

What is Revenue-Based Financing?

Revenue-based financing refers to financial arrangements where a company sells part of its future or outstanding revenues to a financier in exchange for immediate liquidity. In Islamic finance, Murabaha is a similar structure where the financier purchases goods or assets on behalf of the business and then sells them at a profit, with payment deferred. This allows businesses to gain the liquidity they need to operate, while the financier earns a profit from the resale.

Meanwhile, Wakala bil Istithmar (investment agency) enables companies to obtain financing by selling a portion of their future receivables. Both models ensure that businesses can meet their operational and capital needs without accruing interest, aligning with Sharia principles.

How Does Revenue-Based Financing (Including Murabaha) Work?

In an RBF model like Murabaha, businesses receive immediate liquidity by agreeing to a future payment of a predetermined profit margin. The financier purchases the required goods, which are then sold to the business at a profit. The company then pays this profit in installments as they generate revenues from their operations or sales.

Wakala bil Istithmar also provides a flexible repayment schedule linked directly to the company’s actual revenues, making it a dynamic solution for growing businesses.

Key Benefits of Revenue-Based Financing (Including Murabaha) ⁠

Quick Access to Liquidity: Whether through Murabaha or Wakala, businesses gain immediate access to funds to cover operational needs.

Sharia Compliance: Both Murabaha and Wakala are compliant with Islamic finance principles, offering ethical financing alternatives without interest-based loans.

Flexible Repayment: In revenue-based financing, repayment is tied to actual business performance, reducing the financial strain on the company compared to fixed loan structures.

The Role of Crowd Financing Platforms like Mamun

Platforms like mamun provide innovative avenues for businesses to access revenue-based financing using models like Murabaha and Wakala. By connecting businesses with a broad pool of investors, these platforms allow companies to secure flexible, Sharia-compliant funding. For investors, this type of financing offers the potential for steady returns, with liquidity that surpasses traditional markets like real estate or stocks.