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Glossary  
Definition of Major Islamic Finance Instruments
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Bai Ajil bi Ajil = delayed-for-immediate sale

The sale price is paid immediately and delivery of the sale item is delayed. Synonymous with Bai al Salam.

Bai al Arboon = deposit-secured sale

A sale agreement in which a security deposit is provided in advance as part payment towards the price of the commodity. The deposit is forfeited if the buyer does not meet his obligation.

Bai al Inah = sale and buy-back

The sale and buy-back of an asset for a higher price than that for which the seller originally sold it. A seller immediately buys back the asset he has sold on a deferred payment basis at a price higher than the original price. This can be seen as a loan in the form of a sale.

Bai al kali’ bi al kali’ = sale of debt for a debt

Prohibited sale, the most well known of which is where a lender extends his debtor’s debt repayment period in return for an increase on the principal, that is, interest.

Bai al Salam = future delivery

A contract whereby the payment is made in cash at the point of contract but the delivery of asset purchased will be deferred to a predetermined date.

Bai Bithaman Ajil = deferred payment sale
Alternative spelling = Bai Muajjal

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 for an agreed price, including a mark-up (profit) for the bank. The client may pay by installments within a pre-agreed period, or in a lump sum. This sale works in a similar way to a Murabahah contract, but with deferred payment.

Bai Dayn = debt financing

The provision of financial resources required for production, commerce and services through the sale and purchase of trade documents and papers. Bai Dayn is a short-term facility with a year or less maturity. Only documents evidencing debts arising from bona fide commercial transactions can be traded.

Bai Istijrar = supply sale

When a supplier agrees to deliver to a client on a regular basis at an agreed price and mode of payment.

Bai Muajjal = deferred payment sale
Alternative spelling = Bai Bithaman Ajil

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 for an agreed price, including a mark-up (profit) for the bank. The client may pay by installments within a pre-agreed period, or in a lump sum. This sale works in a similar way to a Murabahah contract, but with deferred payment.

Bai Muzayadah = open bidding trading

The principle governing open auctions, where the asset is awarded to the highest bidder.

Bai Wafa = sale and buy-back

The sale and buy-back of an asset within a set time, when the original buyer agrees to the original seller's repurchase.

Baitul Mal = treasury

Batil = null and void

 

 
Latest Issue
Wednesday 1st April 2015
Volume 12 Issue 13
   
Cover Story
IFN Rapid
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Asset Management
Takaful
Ratings
Moves
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IFN Country Analysis
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IFN Sector Analysis
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Green Sukuk in the US
Islamic finance in the US – Origins and trajectory
Creating curiosity in Islamic products in the US
Opportunities abound in GCC region for Islamic asset management
Case Study
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