There are 70 entries in the glossary.
Pages: 1
| A place to rob ! HSBC |
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| Al Ajr | Refers to commission, fees or wages charged for services.
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| Al Fard al Kifa'i | Socially obligatory duties. Literally, a collective duty of Muslims, the discharge of which by some of them absolves the rest of its performance, such as funeral prayers. Technically it covers such functions which the community fails to or cannot perform and hence are taken over by the state, such as the provision of utilities, building of roads, bridges and canals etc. |
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| Al Rahn Al | An arrangement whereby a valuable asset is places as a collateral for a debt. The collateral may be disposed off in the event of a default. |
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| Al Wadia | Resale of goods with a discount on the original stated cost. |
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| Al Wadiah | Safe keeping |
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| Al Wakala | Absolute power of attorney. |
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| Amanah | Lit: reliability, trustworthiness, loyalty, honesty. Technically, an important value of Islamic society in mutual dealings. It also refers to deposits in trust. A person may hold property in trust for another, sometimes by implication of a contract. |
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| ATM | Automatic Teller Machine
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| Awkaf | A religious foundation set up for the benefit of the poor. |
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| Bai al Dayn | Debt financing: the provision of financial resources required for production, commerce and services by way of sale/purchase of trade documents and papers. Bai al-Dayn is a short-term facility with a maturity of not more than a year. Only documents evidencing debts arising from bona fide commercial transactions can be traded. |
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| Bai al Salam | This term refers to advance payment for goods which are to be delivered later. Normally, no sale can be effected unless the goods are in existence at the time of the bargain. But this type of sale forms an exception to the general rule provided the goods are defined and the date of delivery is fixed. The objects of this type of sale are mainly tangible things but exclude gold or silver as these are regarded as monetary values. Barring these, bai 'salam covers almost all things which are capable of being definitely described as to quantity, quality and workmanship. One of the conditions of this type of contract is advance payment; the parties cannot reserve their option of rescinding it but the option of revoking it on account of a defect in the subject matter is allowed. It is also applied to a mode of financing adopted by Islamic banks. It is usually applied in the agricultural sector where the bank advances money for various inputs to receive a share in the crop, which the bank sells in the market. |
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| Bai Al-Arboon | A sale agreement in which a security deposit is given in advance as a partial payment towards the price of the commodity purchased. This deposit is fortified if the buyer failed to meet his obligation |
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| Bai Bithaman Ajil | This contract refers to the sale of goods on a deferred payment basis. Equipment or goods requested by the client are bought by the bank which subsequently sells the goods to the client an agreed price which includes the bank's mark-up (profit). The client may be allowed to settle payment by instalments within a pre-agreed period, or in a lump sum. Similar to a Murabaha contract, but with payment on a deferred basis. |
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| Bai Muajjal | A contract involving the sale of goods on a deferred payment basis. The bank or provider of capital buys the goods (assets) on behalf of the business owner. The bank then sells the goods to the client at an agreed price, which will include a mark-up since the bank needs to make a profit. The business owner can pay the total balance at an agreed future date or make instalments over a pre-agreed period. This is similar to a Murabaha contract since it is also a credit sale. There is a financial institution in Malaysia that offers an Islamic Visa card based on this type of contract. |
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| Baitul Mal | Treasury |
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| DFSA | Dubai Financial Services Authority |
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| Diminishing Musharaka | Diminishing Musharaka allows equity participation and sharing of profit on a pro rata basis but also provides a method through which the equity of the bank keeps on reducing its equity in the project and ultimately transfers the ownership of the asset on of the participants. The contract provides for a payment over and above the bank share in the profit for the equity of the project held by the bank. That is the bank gets a dividend on its equity. At the same time the entrepreneur purchases some of its equity. Thus, the equity held by the bank is progressively reduced. After a certain time the equity held b y the bank shall come to zero and it shall cease to be a partner. Musharaka form of financing is being increasingly used by the Islamic banks to finance domestic trade, imports and to issue letters of credit. It could also be applied in agriculture and Industry. |
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| Dirham | Name of a unit of currency, usually a silver coin, used in the past in several Muslim countries and still used in some Muslim countries, such as Morocco and United Arab Emirates. |
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| Fatwah | A religious decree. |
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| Fiqh | Islamic jurisprudence. The science of the Shariah. It is an important source of Islamic economics. |
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| Gharar | Lit: uncertainty, hazard, chance or risk. Technically, sale of a thing which is not present at hand; or the sale of a thing whose consequence or outcome is not known; or a sale involving risk or hazard in which one does not know whether it will come to be or not, such as fish in water or a bird in the air. |
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| Hadith | Prophet's commentary on Qur'an |
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| Hajj | Hajj means pilgrimage to Mecca and other holy places. Hajj, the fifth pillar of Islam, is a duty on every Muslim who is financially and physically able to carry it out, at least once in his lifetime. There is a specific period for Hajj, namely one week from the 8th day of the Islamic month of Dhul Hijjah to the 13th day of that month in the Islamic lunar calendar. |
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| Halal | That which is permissible. The concept of halal has spiritual overtones. In Islam there are activities, professions, contracts and transactions which are explicitly prohibited (haram) by the Qur'an or the Sunnah. Barring them, all other activities, professions, contracts, and transactions etc. are halal. |
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| Hanifite laws | Islamic school of law founded by Imam Abu Hanifa. Followers of this school are known as Hanafis. |
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| Haram | Unlawful |
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| Hawala | Lit: bill of exchange, promissory note, cheque or draft. Technically, a debtor passes on the responsibility of payment of his debt to a third party who owes the former a debt. Thus the responsibility of payment is ultimately shifted to a third party. Hawala is a mechanism for settling international accounts, by book transfers. |
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| Ijara | Leasing: A contract where the bank or financier buys and leases equipment or other assets to the business owner for a fee. |
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| Ijarah wa Iqtina | (Lease to Purchase) This term refers to a mode of financing adopted by Islamic banks. It is a contract under which the Islamic bank finances equipment, a building or other facility for the client against an agreed rental together with an undertaking from the client to purchase the equipment or the facility. The rental as well as the purchase price is fixed in such a manner that the bank gets back its principal sum along with some profit which is usually determined in advance. |
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| Ijtehad | Lit: effort, exertion, industry, diligence. Technically, endeavor of a jurist to derive or formulate a rule of law on the basis of evidence found in the sources. |
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| Iman | Faith |
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| Istisna | (Progressive Financing)
A contract of acquisition of goods by specification or order where the price is paid progressively in accordance with the progress of a job. An example would be for the purchase of a house to be constructed, payments are made to the developer or builder according to the stage of work completed. This type of financing along with bai salam are used as purchasing mechanisms, and murabaha and bai muajjal are for financing sales. |
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| Ju'alal | Lit: stipulated price for performing any service. Technically applied in the model of Islamic banking by some. Bank charges and commission have been interpreted to be ju'ala by the jurists and thus considered lawful. |
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| Mansil | Shariah compliant property mortgage in the UK |
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| Maysir | Gambling. One of three fundamental prohibitions in Islamic finance (the other two being riba and gharar). The prohibition on maysir is often used as the grounds for criticism of conventional financial practices such as speculation, conventional insurance and derivatives. |
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| Mu'amalah | Lit: economic transaction. Technically, lease of land or of fruit trees for money, or for a share of the crop. |
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| Mudaraba | (Trust Financing)
The term refers to a form of business contract in which one party brings capital and the other personal effort. The proportionate share in profit is determined by mutual agreement. But the loss, if any, is borne only by the owner of the capital, in which case the entrepreneur gets nothing for his labour. The financier is known as 'rab-al-maal' and the entrepreneur as 'mudarib'. As a financing technique adopted by Islamic banks, it is a contract in which all the capital is provided by the Islamic bank while the business is managed by the other party. |
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| Mudarib | The mudarib is the entrepreneur or investment manager in a mudarabah who invests the investor's funds in a project or portfolio in exchange for a share of the profits. For example, a mudarabah is essentially similar to a diversified pool of assets held in a Discretionary Asset Management Portfolio. |
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| Murabaha | (Cost-Plus Financing)
Lit: sale on profit. Technically a contract of sale in which the seller declares his cost and profit. This has been adopted as a mode of financing by a number of Islamic banks. As a financing technique, it involves a request by the client to the bank to purchase a certain item for him. The bank does that for a definite profit over the cost which is settled in advance. Some people have questioned the legality of this financing technique because of its similarity to riba or interest. |
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| Musaqah | A contract in which the owner of the garden shares its produce with another person in return for his services in irrigating the garden. |
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| Musharaka | (Venture Capital)
Musharaka is another popular techniques of financing used by Islamic banks. It could roughly be translated as partnership. In this technique two or more financiers provide finance for a project. All partners are entitled to a share in the profits resulting from the project in a ratio which is mutually agreed upon. However, the losses, if any, are to be shared exactly in the proportion of capital proportion. |
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| Musharakah | Profit and loss sharing. It is a partnership where profits are shared as per an agreed ratio whereas the losses are shared in proportion to the capital/investment of each partner. In a Musharakah, all partners to a business undertaking contribute funds and have the right, but not the obligation, to exercise executive powers in that project, which is similar to a conventional partnership structure and the holding of voting stock in a limited company. This equity financing arrangement is widely regarded as the purest form of Islamic financing. |
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| Muzara'a | It is a contract in which one person agrees to till the land of the other person in return for a part of the produce of the land. |
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| Nisab | Exemption limit for the payment of zakah. It is different for different types of wealth. |
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| Permanent Musharaka | In this form of Musharaka an Islamic bank participates in the equity of a project and receives a share of profit on a pro rata basis. The period of contract is not specified. So it can continue so long as the parties concerned wish it to continue. This technique is suitable for financing projects of a longer life where funds are committed over a long period and gestation period of the project may also be long. |
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| Qard Hasan | (Interest free loans)
Most of the Islamic banks also provide interest free loans (Qard Hasan) to their customers. If this practice is not possible on a significant scale, even then, it is adopted at least to cover some needy people. Islamic view about loan (Qard) is that it should be given to borrower free of charge. |
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| Qimer | Lit: gambling. Technically, an agreement in which possession of a property is contingent upon the occurrence of an uncertain event. By implication it applies to those agreements in which there is a definite loss for one party and definite gain for the other without specifying which party will gain and which party will lose. |
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| Rab-al-maal | In a mudaraba contract the person who invests the capital. |
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| Riba | This term literally means an increase or addition. Technically it denotes any increase or advantage obtained by the lender as a condition of the loan. Any risk-free or "guaranteed" rate of return on a loan or investment is riba. Riba, in all forms, is prohibited in Islam. In conventional terms, riba and "interest" are used interchangeably. |
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| Riba al Buyu | A sale transaction in which a commodity is exchanged for the same commodity but unequal in amount and the delivery of at least one commodity is postponed. To avoid riba-al-buyu, the exchange of commodities from both sides should be equal and instant. Riba-al-buyu was prohibited by the prophet Mohammad to forestall riba (interest) from creeping into the economy from the back door. |
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| Riba al Diyun | Usury of debt. |
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| Riba al Fadl | Usury of trade. It is an alternative term for riba al-buyu. |
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| Riba al Nasia | Increment on the principal of a loan payable by the borrower. It refers to the practice of lending money for any length of time on the understanding that the borrower would return to the lender at the end of this period the amount originally lent together with an increment in consideration of the lender having granted him time to pay. The increment was known as riba al-nasia. It was in vogue in Arabia in the days of the Prophet Muhammad. |
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| Ruq'a | Banking instrument of the early Muslim period. It was a payment order to draw money from the bank. |
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| Sadaqah | Charitable giving |
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| Samad | Shariah Compliant property mortgage in the US |
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| SBP | State Bank of Pakistan
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| Shari'a | Islamic cannon law derived from 3 sources: the Quran; the Hadith (sayings of the Prophet Muhammad); and the Sunnah (practice and traditions of the Prophet Muhammad). |
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| Sharia | Islamic cannon law derived from 3 sources: the Quran; the Hadith (sayings of the Prophet Muhammad); and the Sunnah (practice and traditions of the Prophet Muhammad). |
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| Sharia law | The Law according to islamic teaching and values.
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| Shariah | Islamic cannon law derived from 3 sources: the Quran; the Hadith (sayings of the Prophet Muhammad); and the Sunnah (practice and traditions of the Prophet Muhammad). |
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| Shirkah | A contract between two or more persons who launch a business or financial enterprise to make profit. |
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| Suftajal | A type of banking instrument used for the delegation of credit during the Muslim period, especially the Abbasides period. It was used to collect taxes, disburse government dues and transfer funds by merchants. It was the most important banking instrument used by traveller merchants. In some cases suftajahs were payable at a future fixed date and in other cases they were payable on sight. Suftajah is distinct from the modem bill of exchange in some respects. Firstly, a sum of money transferred by suftajah had to keep its identity and payment had to be made in the same currency. Exchange of currencies could not take place in this case. Secondly, Suftajah usually involved three persons. 'A' pays a certain sum of money to 'B' for agreeing to give an order to 'C' to pay back to 'A'. Third, a Suftajahs could be endorsed. The Arabs had been using endorsements (hawala) since the days of the Prophet Muhammad. |
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| Takaful | Mutual support which is the basis of the concept of insurance or solidarity among Muslims. |
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| Tawarruq | Reverse murabahah. As used in personal financing, a customer with a genuine need buys something on credit from the bank on a deferred payment basis and then immediately resells it for cash to a third party. In this way, the customer can obtain cash without taking an interest-based loan. |
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| Wakalah | (Takaful model) is a form of representative relationship between an operator and participant. - The contract of Tabarru' wherein the participant agrees to donate a pre-determined percentage of contribution to the fund to provide assistance to fellow participants
- The contract of Al-Wakalah wherein the participant authorises the Takaful company to conduct affairs of the fund on his/her baahalf
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| Waqf | Lit: detention. Technically appropriation or tying-up of a property in perpetuity so that no propriety rights can be exercised over the usufruct. The Waqf property can neither be sold nor inherited or donated to anyone. Awqaf consists of religious foundations set up for the benefit of the poor. |
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| Zakah | A tax which is prescribed by Islam on all persons having wealth above an exemption limit at a rate fixed by the Shariah. According to the Islamic belief Zakah purifies wealth and souls. The objective is to take away a part of the wealth of the well-to-do and to distribute it among the poor and the needy. It is levied on cash, cattle, agricultural produce, minerals, capital invested in industry, and business etc. The distribution of Zakah fund has been laid down in the Qur'an (9:60) and is for the poor, the needy, Zakah collectors, new converts to Islam, travellers in difficulty, captives and debtors etc. It is payable if the owner is a Muslim and sane. Zakah is the third pillar of Islam. It is an obligatory contribution which every well-off Muslim is required to pay to the Islamic state, in the absence of which individuals are required to distribute the Zakah among the poor and the needy as prescribed by the Shariah. |
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| Zakat | A tax which is prescribed by Islam on all persons having wealth above an exemption limit at a rate fixed by the Shariah. According to the Islamic belief Zakah purifies wealth and souls. The objective is to take away a part of the wealth of the well-to-do and to distribute it among the poor and the needy. It is levied on cash, cattle, agricultural produce, minerals, capital invested in industry, and business etc. The distribution of Zakah fund has been laid down in the Qur'an (9:60) and is for the poor, the needy, Zakah collectors, new converts to Islam, travellers in difficulty, captives and debtors etc. It is payable if the owner is a Muslim and sane. Zakah is the third pillar of Islam. It is an obligatory contribution which every well-off Muslim is required to pay to the Islamic state, in the absence of which individuals are required to distribute the Zakah among the poor and the needy as prescribed by the Shariah. |
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