Urbun

Urbun (Arabic: عربون, literally 'earnest money') is an Islamic contract in which a buyer pays a non-refundable deposit to secure the right to complete a purchase within a specified period. If the buyer proceeds with the purchase, the deposit is applied to the price; if the buyer withdraws, the seller retains the deposit as compensation. Urbun is considered by some Shariah scholars as the closest Islamic equivalent to a call option, permitting the buyer a right — but not an obligation — to buy. The Hanbali school permits Urbun; other schools historically restricted it due to concerns about Gharar (uncertainty). AAOIFI's Shariah Standard No. 20 and the OIC Islamic Fiqh Academy resolution permit Urbun with conditions: the period must be defined, the subject matter must be specified, and the deposit must be reasonable. Urbun structures underpin Islamic hedging instruments and are used in real estate pre-sales, commodity contracting, and some Sukuk structures.