|
A-E,
F-L, M-P,
Q-S, T-Z
|
| Al-Ajr |
| Refers
to commission, fees or wages charged for services. |
| 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. |
| Amana/Amanah |
| In
trust |
| Al-wadia |
| Resale
of goods with a discount on the original stated cost. |
| Al-wakala
|
| Absolute
power of attorney |
| 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. |
| Al-wadiah
|
| Safe
keeping |
| Awkaf/Awqaf
|
| A
religious foundation set up for the benefit of the poor |
| Bai
mu’ajjal |
| Lit:
a credit sale. Technically, a financing technique adopted
by Islamic banks. It is a contract in which the seller allows
the buyer to pay the price of a commodity at a future date in
a lump sum or in instalments. The price fixed for the
commodity in such a transaction can be the same as the spot
price or higher or lower than the spot price. |
| Bai
Muajjal (Deferred Payment Contract) |
| 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. |
| Bai'muajjal |
| Deferred-payment
sale |
| 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. |
| 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. |
| Bai
Salam |
| A
sales contract where the buyer pays in advance for the goods,
which are delivered in the future. This type of financing is
most often used when a manufacturer needs capital to manufacture
a final product for the buyer. In return for paying in advance,
the buyer receives a more favourable price (i.e. splits the
profit margin with the manufacturer). |
| Bai
al Salam |
| Contract
of sale of goods where the price is paid in advance and the
goods are delivered in the future. |
| Bai'salam
|
| pre-paid
purchase |
| 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. |
| Baitul
mal |
| treasury
|
| Dirham
|
| currency |
| Back
to the top |
| A-E,
F-L, M-P, Q-S,
T-Z |
| Fatwah
|
| A
religious decree. |
| Fiqh
|
| Islamic
jurisprudence. The science of the Shariah. It is an important
source of Islamic economics. |
| Fiqh
|
| jurisprudence
|
| 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. |
| Gharar
|
|
Deception
through ignorance by one or more parties to a contract. Gambling
is a form of gharar because the gambler is ignorant
of the result of the gamble. There are several types of gharar,
all of which are haram. The following are some examples:
- Selling
goods that the seller is unable to deliver
- Selling
known or unknown goods against an unknown price, such as
selling the contents of a sealed box
- Selling
goods without proper description, such as shop owner selling
clothes with unspecified sizes
- Selling
goods without specifying the price, such as selling at the
'going price'
- Making
a contract conditional on an unknown event, such as when
my friend arrives if the time is not specified
- Selling
goods on the basis of false description
- Selling
goods without allowing the buyer the properly examine the
goods
|
| Gharar |
| The
root Gharar denotes deception. Bay’ al-Gharar is an exchange
in which there is an element of deception either through ignorance
of the goods, the price, or through faulty description of the
goods. Bay' al-Gharar is an exchange in which one or both
parties stand to be deceived through ignorance of an essential
element of exchange. Gambling is a form of Gharar because the
gambler is ignorant of the result of his gamble. |
| Hadith
|
| Prophet's
commentary on Qur'an |
| 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. This is one of the distinctive
features of Islamic economics vis-a-vis Western economics where
no such concept exists. In Westem economics, all activities
are judged on the touchstone of economic utility. In Islamic
economics, other factors, mostly spiritual and moral are also
involved. An activity may be economically sound but may
not be allowed in the Islamic society if it is not permitted
by the Shari'ah. |
| 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. |
| Hanifite
laws |
| Islamic
school of law founded by Imam Abu Hanifa. Followers of
this school are known as Hanafis. |
| 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. This obviates, to a large extent, the
necessity of physical transfer of cash. The term was also
used historically in public finance during the Abbaside period
to refer to cases where the state treasury could not meet the
claims presented to it and it directed the claimants to occupy
a certain region for a specified period of time and procure
their claims themselves by taxing the people. This method
was also known as ‘Tasabbub’. The taxes collected
and transmitted to the central treasury were known as ‘Mahmul’,
while those assigned to the claimants were known as ‘Musabbub’.
|
| Haram
|
| unlawful |
| Ijara
|
| Lit:
letting on lease. Technically, sale of a definite usufruct in
exchange for a definite reward. Commonly used for wages, it
also refers to a contract of land lease at a fixed rent payable
in cash. It is contrary to "Muzarah" when
rent is fixed as a certain percentage of the produce of land.
It also refers to a mode of financing adopted by Islamic banks.
It is an arrangement under which an Islamic bank leases equipment,
a building or other facility to a client against an agreed rental.
The rent is so fixed that the bank gets back its original investment
plus a profit on it. |
| Ijara
(Leasing) |
|
Leasing
is also a lawful method of earning income, according to Islamic
law. In this method, a real assets such a machine, a car,
a ship, a house, can be leased by one person (lessor) to the
other (lessee) for a specific period against a specific price.
The benefit and cost of the each party are to be clearly spelled
out in the contract so as any ambiguity (Gharar) may be avoided.
Leasing
is emerging as a popular technique of financing among the
Islamic banks. Some of the Islamic banks that use this technique
include Islamic Development Bank, Bank Islam Malaysia and
many commercial banks in Pakistan.
Under
this scheme of financing an Islamic bank purchases an asset
as per specification provided by the client. The period of
lease may be determined by mutual agreement according to nature
of the asset. During the period of the lease, the asset remains
in the ownership of the lessor (the bank) but its right to
use is transferred to the lessee. After the expiry of the
lease agreement, this right reverts back again to the lessor.
Leasing
as a technique of Islamic finance holds a lot of promise and
potential to develop into a viable and power tool of financing.
At present many Islamic banks are experimenting with various
forms of leasing one of which is the lease purchase agreement.
In this scheme, the lessee can purchase the equipment at the
end of the lease period at a price that is agreed in advance.
In most cases, the payment may constitute of the two components:
rent and a portion of the price to be paid in the instalments.
In another variant of lease purchase agreement, the rent may
itself constitute the part payment of the price. |
| Ijara(Leasing) |
| A
contract under which a bank purchases and leases out equipment
required by its client for a rental fee. The duration of the
lease and rental fees are agreed in advance. Ownership of the
equipment remains in the hands of the bank. |
| Ijara
wa Iqtina (Lease to Purchase) |
| The
same as ijara except the business owner is committed
to buying the equipment at the end of the lease period. Fees
previously paid constitute part of the purchase price. This
type of lease to purchase agreement is commonly used for home
financing. |
| Ijara-Wa-Iktina
(Lease Purchase) |
| Like
Ijara, except that the client is committed to purchase the equipment
at the end of the rental period. It is pre-agreed that at the
end of the lease period the client will purchase the equipment
at an agreed price from the bank, with rental fees paid to date,
forming part of the price. |
| Ijtehad
|
| Lit:
effort, exertion, industry, diligence. Technically, endeavour
of a jurist to derive or formulate a rule of law on the basis
of evidence found in the sources. |
|
Iman
|
| Faith |
| 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. |
| Istisna
|
| A
contract of acquisition of goods by specification or order,
where the price is paid in advance, but the goods are manufactured
and delivered at a later date. |
| 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.
Some
Islamic Banks give loans with service charge. The Council
of the Islamic Fiqh Academy established by the Organisation
of Islamic Conference in its third session held in Amman,
Jordan from 8 to 13 Safar 1407 H (11-16 October 1986), in
response to a query from the Islamic Development Bank has
resolved that it is permitted to charge a fee for loan related
service offered by an Islamic Bank. However, this fee should
be within actual expenditures and any fee in excess to actual
service related expenses is forbidden because it is considered
usurious. The service charge may be calculated accurately
only after a certain period when all administrative expenditure
has already been incurred e.g. at the end of the year. Hence,
it is permissible to levy an approximate charge on the client,
then, reimburse or claim the difference at the end of the
accounting period when actual expenses on administration become
precisely known. |
| Back
to the top |
| A-E,
F-L, M-P, Q-S,
T-Z |
| Mudaraba
|
| 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 ‘rabal-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. The profit is shared in pre-agreed
ratios, and loss, if any, unless caused by negligence or violation
of terms of the contract by the ‘mudarib’ is borne by
the Islamic bank. The bank passes on this loss to the
depositors. |
| Mudaraba
(Trust Financing) |
| We
may act as managing trustee (‘Modareb’) while you are the beneficial
owner (Rab El-Maal). It is our responsibility to invest the
funds that you provide. Alternatively, our roles may be reversed,
when you, as managing trustee, are responsible for investing
our funds. In each case, we shall agree on our relative share
of any profits. |
| Mudaraba |
|
In
the theoretical model of Islamic banking Mudaraba has been
suggested a technique which shall provide the basis for the
Islamic re-organisation of commercial banking sector. In actual
practice of Islamic banking, Mudaraba has not made much progress
on t he asset side of the balance sheet, although on the liability
side the Islamic banks on Mudaraba accept the funds in investment
accounts. Mudaraba is mostly translated in English as profit
and loss sharing.
There
is no loss sharing in a Mudaraba contract. Profit and loss
sharing is more accurate description of the Musharaka contract.
The Mudaraba contract may better be represented by the expression
profit sharing Mudaraba is an Islamic contract in which one
party supplies the money and the other provides management
in order to do a specific trade. The party supplying the capital
is called owner of the capital. The other party is referred
to as worker or agent who actually runs the business. In the
Islamic Jurisprudence, different duties and responsibilities
have been assigned to each of these two.
As
a matter of principle the owner of the capital does not have
a right to interfere in to the management of the business
enterprise which is the sole responsibility of the Agent x.
However, he has every right to specify such conditions that
would ensure better management of his money. That is why sometime
Mudaraba is referred as sleeping partnership. An important
characteristic of Mudaraba is the arrangement of profit sharing.
The profits in a Mudaraba agreement may be shared in any proportion
agreed between the parties before hand. However, the loss
is to be completely borne by the owner of the capital. In
case of loss, the capital owner shall bear the monetary loss
and agent shall lose the reward of his effort. Mudaraba could
be individual or joint.
Islamic
banks practice Mudaraba in its both forms. In case of individual
Mudaraba an Islamic bank provides finance to a commercial
venture run by a person or a company on the basis of profit
sharing. The joint Mudaraba may be between the investors and
the bank on a continuing basis. The investors keep their funds
in a special fund and share the profits without even the liquidation
of those financing operations that have not reached the stage
of final settlement. Many Islamic Investment Funds operate
on the basis of joint Mudaraba. |
| Mudaraba |
| This
is an agreement made between two parties: one which provides
‘100 percent of the capital’ for the project and another party
known as a ‘Mudarib’ who using his entrepreneurial skills, manages
the project. Profits arising from the project are distributed
according to a predetermined ratio. Any losses accruing are
borne by the provider of capital. The provider of capital has
no control over the management of the project. |
| Mudarib
|
| In
a mudaraba contract, the person or party who acts as
entrepreneur.
|
|
Mu'amalah
(t) |
| Lit:
economic transaction. Technically, lease of land or of
fruit trees for money, or for a share of the crop. |
| Murabaha |
|
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. |
| Murabaha
(Cost-Plus Financing) |
| A
contract of sale between the bank and its client for the sale
of goods at a price plus an agreed profit margin for the bank.
The contract involves the purchase of goods by the bank which
then sells them to the client at an agreed mark-up. Repayment
is usually in instalments. |
| Morabaha
(Cost-Plus Financing) |
| Used
if you wish to purchase equipment or goods. We will purchase
these items, and then sell them to you at cost - plus a reasonable
profit. |
|
Murabaha
|
|
Murabaha
is the most popular and most common mode of Islamic inancing.
It is also known as Mark up or Cost plus financing. The word
Murabaha is derived from the Arabic word Ribh that means profit.
Originally, Murabaha was a contract of sale in which a ommodity
is sold on profit. The seller is obliged to tell the buyer
his ost price and the profit he is making. This contract has
been modified a little for application in the financial sectoIn
its modern form Murabaha has become the single most popular
technique of financing amongst the Islamic banks all over
the world. It has been estimated that 80 to 90 percent of
financial operations of some Islamic banks belong to this
category. The Murabaha mode of finance operates in the following
way: The client approaches an Islamic bank to get finance
in order to purchase a specific commodity. An interest-based
bank would lend the money on interest to this customer. The
customer would go and buy the required commodity from the
market. This option is not available to the Islamic bank,
as it does not operate on the basis of interest. It can not
lend the money on interest. It can not lend money with zero
interest rate, as it has to make some money to stay in the
business.
Some
portion of total finance may be offered as an interest free
loan, however, the banking institutions have to make profit
in order to stay in business. Hence, what course of action
is open to the bank? The Murabaha model offers a solution.
The bank purchases the commodity on cash and sells it to the
customer on a profit. Since the client has no money, he buys
the commodity on deferred payment basis. Thus, the client
got the commodity for which he wanted the finance and the
Islamic bank made some profit on the amount it had spent in
acquiring the commodity.
There
are a number of requirements f or this transaction to be a
real transaction to meet the Islamic standards of a legal
sale. The whole of Murabaha transaction is to be completed
in two stages. In the first stage, the client requests the
bank to undertake a Murabaha transaction and promises to buy
the commodity specified by him, if the bank acquires the same
commodity. Of course, the promise is not a legal binding.
The client may go back on his promise and the bank risks the
loss of the amount it has spent. In the second stage, the
client purchases the good acquired by the bank on a deferred
payments basis and agrees to a payment schedule. Another important
requirement of Murabaha sale is that two sale contracts, one
through which the bank acquires the commodity and the other
through which it sells it to the client should be separate
and real transactions.
The
Murabaha form of financing is being widely used by the Islamic
banks to satisfy various kinds of financing requirements.
It is used to provide finance in various and diverse sectors
e. g. in consumer finance for purchase of consumer durable
such as cars and household appliances, in real estate to provide
housing finance, in the production sector to finance the purchase
of machinery, equipment and raw material etc. However, probably
the most common and the most popular application of Murabaha
is in financing the short-term trade for which it is eminently
suitable. Murabaha contracts are also used to issue letters
of credit and to provide financing to import trade.
|
|
Murabaha
|
| (Cost-plus
financing) This is a contract sale between the bank and
its client for the sale of goods at a price which includes a
profit margin agreed by both parties. As a financing technique,
it involves the purchase of goods by the bank as requested by
its client. The goods are sold to the client with a mark-up.
Repayment, usually in instalments is specified in the contract.
|
| Musharaka |
| The
term refers to a financing technique adopted by Islamic banks.
It is an agreement under which the Islamic bank provides funds
which are mingled with the funds of the business enterprise
and others. All providers of capital are entitled to participate
in the management but not necessarily required to do so.
The profit is distributed among the partners in predetermined
ratios, while the loss is borne by each partner in proportion
to his contribution. |
| Musharaka
(Partnership Financing) |
| This
is a classical partnership agreement. All parties involved contribute
to towards the financing of a venture. The parties share profits
on a pre-agreed ratio while losses are shared according to each
parties equity participation. Here again the reason is because
in Islam, one cannot loose what they did not contribute. Management
of the venture is carried out by all, some, or just one party
member. |
| Musharaka
(Joint Venture) |
| We
add our funds to your funds, and participate in the equity of
the project. We share profits and losses in direct proportion
to our contributions. |
| Musharaka |
| 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. All partners have a right to participate in the
management of the project. However, the partners also have a
rig ht to waive the right of participation in favour of any
specific partner or person. There are two main forms of Musharaka:
Permanent Musharaka and Diminishing Musharaka. These are briefly
explained below: |
| 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. |
| 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. |
|
Musharaka (Venture Capital) |
| This
Islamic financing technique refers to a partnership between
two parties, who both provide capital towards the financing
of a project. Both parties share profits on a pre- agreed ratio,
but losses are shared on the basis of equity participation.
Management of the project is carried out by both the parties.
|
| 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. |
| 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. |
| Nisab
|
| Exemption
limit for the payment of zakah. It is different
for different types of wealth. |
| Back
to the top |
| A-E,
F-L, M-P, Q-S,
T-Z |
| Qard
al hasana |
| A
virtuous loan. A loan with the stipulation to return the principal
sum in the future without any increase. |
| Qard
Hassan |
| An
interest-free loan given for either welfare purposes or for
fulfilling short-term funding requirements. The borrower is
only obligated to repay back the principal amount of the loan. |
| 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. A person
is seeking a loan only if he is in need of it. Hence, it is
a moral duty of the lender to help his brother who may be
in need. The borrower should not make an effort to take advantage
of somebody needs. He should help the needy by lending him
money without any charge. The reward of this act is with the
God. Hence, it is referred as Qard Hasan (benevolent loan)
which signifies the benevolent nature of the act of lending.
The
practices of various Islamic banks in this respect differ.
Some Islamic banks provide the privilege of interest free
loans only to the holders of investment account with them.
Some extend to all bank clients. Some restrict it to needy
students and other economically weaker sections of the society.
Yet some other Islamic banks provide interest free loans to
small producers, farmers and entrepreneurs who are not qualified
to get finance from other sources. The purpose of these loans
is to help start them their independent economic life and
thus to raise their incomes and standard of living. |
| Qard
Hasan |
| An
interest-free loan given mainly for welfare purposes. The borrower
is only required to pay back the amount borrowed |
| 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. |
| Qirad |
| mudaraba |
| Rab-al-maal
|
| In
a mudaraba contract the person who invests the capital. |
| Rabbul-mal
|
| owner
of capital |
| Riba |
| Lit:
an excess or increase. Technically, an increase, which
in a loan transaction or in exchange of a commodity, accrues
to the owner (lender) without giving an equivalent counter value
or recompense in return to the other party. It covers
interest both on commercial and consumer loans. |
| 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.
|
| Riba |
| Literally,
an increase or addition. Technically it denotes in a loan transaction
any increase or advantage obtained by the lender as a condition
of the loan. In a commodity exchange it denotes any disparity
in the quantity or time of delivery. |
| 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. |
| Riba
al-fadl |
| Usury
of trade. It is an alternative term for riba al-buyu.
|
| Riba
al-diyun |
| Usury
of debt. |
| 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.
|
| Ruq'a |
| Banking
instrument of the early Muslim period. It was a payment
order to draw money from the bank. |
| Sadaqah |
| Charitable
giving. |
| Shari'a
|
| The
way of Allah as shown by the Qur'an and the Sunnah of
the Prophet Muhammad. The term is used to refer to the
Islamic law. |
| Sharia |
| Islamic
law derived from three sources - the Quran, the Hadith, and
the Sunnah. |
| 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). |
| Shirkah |
| A
contract between two or more persons who launch a business or
financial enterprise to make profit. |
| Shirka
|
| musharaka
|
| 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.
|
| Sallallahu
alaihi wassallam (SAW) |
| This
is a salutation used by Muslims whenever referring to the Prophet
Muhammad. It is abbreviated as 'SAW'. It means 'peace
and blessings of God be upon him'. |
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| A-E,
F-L, M-P, Q-S,
T-Z |
| Takaful |
| Mutual
support which is the basis of the concept of insurance or solidarity
among Muslims. |
| Takaful |
| This
is a form of Islamic insurance based on the Quranic principle
of Ta'awon or mutual assistance. It provides mutual protection
of assets and property and offers joint risk sharing in the
event of a loss by one of its members. Takaful is similar
to mutual insurance in that members are the insurers as well
as the insured. Conventional insurance is prohibited in Islam
because its dealings contain several haram elements including
gharar and riba, as mentioned above. |
| 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.
|
| Zakah/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.
|
| Zakat
(Religious Tax) |
|
There
are two type of Zakat:
Zakat
al-Fitr which is payable by every Muslim able to pay,
at the end of Ramadan (the month of fasting). This is also
called Zakat al-Nafs (Poll Tax).
Zakat
al Maal is an annual levy on the wealth of a Muslim (above
a certain level). The rate paid, differs according to the
type of property owned. This tax is earmarked for amongst
others for the poor and needy.
|
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