Flexible Murabaha: Comprehensive Guide to Islamic Finance in Saudi Arabia

Flexible Murabaha is an Islamic financing model based on the principle of selling an asset or commodity to the client at a pre-agreed profit margin, with the possibility of adjusting certain terms in line with the client's needs or market changes. In this model, the financing company purchases the asset at the client's request and then sells it to them at cost plus a known profit. The flexibility of the product lies in the ability to reschedule installments or adjust the profit margin according to specific criteria, but always within the Sharia framework and under the supervision of a specialized Sharia committee. This model is characterized by transparency, as all costs and profits are predetermined and documented in the contract, making it a Sharia-compliant alternative to traditional financing based on interest. In Saudi Arabia, the emergence of Flexible Murabaha is part of a strategy to enhance Islamic financing and provide innovative financing solutions that meet the needs of small and medium enterprises and individuals seeking Sharia-compliant products.

The idea of Flexible Murabaha began to emerge in Saudi Arabia with the government's direction towards developing the non-banking financing sector and expanding options for Sharia-compliant financing. The Flexible Murabaha Financing Company was established under licenses issued by the Saudi Central Bank (SAMA) in 2022, becoming the first non-banking financing company specialized in Murabaha products, leasing, and Tawarruq. The company's stock was listed on the Saudi financial market (Tadawul) in mid-2023 under the symbol 4082 (Murabaha), which strengthened its position in the sector and contributed to increasing investor confidence. This model aims to empower small and medium enterprises through flexible and innovative financing solutions, away from the traditional constraints of banks, while fully adhering to Sharia provisions. The company has contributed to bridging a significant financing gap, especially in working capital financing and small projects that may not receive adequate support from traditional banks.

Flexible Murabaha differs from traditional banking financing in several key aspects, the most important being the Sharia basis and the method of calculating profit. In traditional financing, banks often rely on interest-bearing loans, which do not comply with Sharia provisions. In the Flexible Murabaha model, there is a commitment to purchase the asset or commodity for the client and then sell it to them at a pre-agreed profit margin. Flexible Murabaha also allows for flexibility in repayment scheduling or adjusting certain terms in specific cases, such as changes in the client's or market's circumstances, while maintaining transparency and clarity in defining all costs. All operations are subject to direct Sharia oversight to ensure full compliance with jurisprudential controls, making this model more attractive to clients seeking Sharia-compliant financing solutions.

The Flexible Murabaha process typically begins with the client requesting financing for a specific commodity or asset from the financing company. The company purchases the asset based on this request and then sells it to the client at cost plus a pre-agreed profit margin. All terms of the transaction are documented in a Sharia-compliant Murabaha contract, including the purchase price, profit margin, and number of installments or repayment period. In some cases, the client enjoys flexible options such as rescheduling installments or adjusting the profit margin according to clear and transparent criteria. The company is committed to highlighting the true cost of the asset and clarifying all fees and commissions, ensuring that there is no suspicion of usurious interest. All contracts are subject to review by a specialized Sharia committee to ensure full compliance with Sharia provisions, with periodic monitoring of contract performance and the quality of the financing portfolio.

The financial products offered by Flexible Murabaha Financing Company vary to include several Sharia-compliant models that meet the needs of individuals and small to medium enterprises. Among the most prominent of these products are: asset Murabaha (such as financing the purchase of industrial equipment, vehicles, or raw materials), leasing (for financing long-term assets), commercial property Murabaha (for financing the purchase of land or commercial buildings), and Tawarruq (to provide cash liquidity through the purchase and sale of goods on an installment basis). The company focuses on speed of execution, simplified procedures, and ongoing post-sale support to ensure the sustainability of funded projects. It also provides flexible financing solutions specifically targeting small and medium industrial and commercial sectors, taking into account each client's requirements and specific circumstances.

Recent financial data for Flexible Murabaha Company has shown remarkable growth dynamics during 2024 and 2025. The stock price at the end of 2024 was approximately 11 Saudi Riyals, and the company's market capitalization stabilized around 2.3 billion Saudi Riyals, with an estimated outstanding share count of about 210 million shares. The price-to-earnings (P/E) ratio ranged between 40 and 45 times, a common level for new companies with rapid growth. The company has not announced any cash dividends yet, preferring to reinvest profits in business expansion and liquidity enhancement. Operating revenues in 2024 increased compared to 2023 due to the rise in the volume of financing granted, especially in the industrial and construction sectors. The company also recorded an annual growth in total assets of nearly 30%, reflecting its ability to enhance its market share in the specialized financing sector.

The non-banking specialized financing sector in Saudi Arabia is rapidly active, driven by the need for financing solutions that meet the requirements of Vision 2030. Flexible Murabaha Company stands out as a leader in this sector, focusing on Islamic financing and Murabaha, Tawarruq, and leasing products. The company competes with several entities, including other Islamic financing companies such as Murabaha Loans (symbol 6062) and Guaranteed Financing (symbol 6061), in addition to major Islamic banks like Alinma Bank and Al Rajhi Bank, and government development funds. Flexible Murabaha is distinguished by the flexibility of its products, simplified procedures, and strong regulatory support from SAMA, giving it a competitive advantage over companies offering traditional solutions. However, competition remains fierce with the entry of new companies and banks striving to develop innovative financing products targeting the same market segment.

Flexible Murabaha Company has recently witnessed several strategic developments that have strengthened its position in the sector. Among the most notable of these developments are: issuing Murabaha sukuk worth 178 million Saudi Riyals in 2023 to enhance capital and expand financing operations, and acquiring an 80% stake in Saudi Digital Payments Company (Loob) to support fintech solutions. The company also signed a memorandum of understanding with HungerStation to support workers in the delivery sector through digital financing solutions. The company received a positive credit rating from Fitch Ratings and announced plans to open regional offices and increase capital to support geographical expansion. These developments reflect the company's ambitious vision for leadership and innovation in the Islamic financing sector.

Despite the promising opportunities, the Flexible Murabaha sector faces several challenges and potential risks. These risks include credit risks due to the focus on small businesses that may face repayment difficulties, operational risks associated with developing internal systems and building strong teams, and market risks arising from fluctuations in global interest rates or changes in regulatory policies. Additionally, there are competitive risks with the entry of new companies or the expansion of traditional banks into Islamic financing products. The company's ability to face these challenges depends on management efficiency, the quality of the financing portfolio, and adherence to precautionary policies to control risks and enhance working capital.

Flexible Murabaha plays a pivotal role in financing small and medium enterprises (SMEs) in Saudi Arabia, especially those that may not receive adequate support from traditional banks. The company offers flexible financing solutions with simplified procedures, helping entrepreneurs and small business owners obtain the necessary funding to develop their businesses or purchase equipment and raw materials. The company also focuses on monitoring projects after financing to ensure their success and sustainability. This role aligns with the goals of Vision 2030 in encouraging entrepreneurship and developing the private sector, enhancing the contribution of SMEs to the GDP.

All Flexible Murabaha operations are subject to strict Sharia standards and controls, with contracts reviewed by specialized Sharia committees to ensure full compliance with Islamic law. The company is committed to highlighting the true cost of the asset, clearly defining the profit margin, and documenting all terms in the contract. The company is also under direct supervision from the Saudi Central Bank (SAMA) and the Capital Market Authority, adhering to precautionary policies in capital management and financing coverage. This regulatory and Sharia framework ensures transparency and protects the rights of clients and investors alike.

Investors and those interested in tracking the performance of Flexible Murabaha Financing Company (stock symbol 4082) can access stock data through the official website of the Saudi financial market (Tadawul). Tadawul provides interim and annual financial reports, in addition to price data and stock movement. Company announcements can also be followed through the investor relations section on its website. To purchase the stock, one must open a trading account with a licensed brokerage firm in the Kingdom and then submit a purchase request through the electronic platform. It is important to evaluate the company's performance and monitor its financial results periodically before making any investment decision, with a necessity to consult a licensed financial advisor.

The growth of the Flexible Murabaha sector in Saudi Arabia is expected to continue, driven by increasing demand for Islamic financing solutions and the expansion of the small and medium enterprises base. With regulatory support from SAMA and the Capital Market Authority, and the company's direction towards innovation and adopting fintech, there are significant opportunities to enhance market share and achieve better financial results in the coming years. The company may see future cash dividends for shareholders after stabilizing cash flows, alongside expanding its product portfolio and exploring new markets. Continuous performance monitoring and risk assessment remain essential factors in the company's long-term success and sustainability.