Click one of the letters above to advance the page to terms beginning with that letter.



English: Accounting and Auditing Organization for Islamic Financial Institutions

Definition: Bahrain-based Islamic international standard setting body established in 1991 for Islamic corporations and the industry. Members include central banks, Islamic financial institutions and other industry participants.


English: countable items measured in individual units rather than by volume, weight or length
Alternate spelling: `Adadiyyat

Definition: An example is eggs, which are customarily purchased by the dozen or half dozen rather than by weight


English: Justice

Definition: Justice, equity and fairness. As used by early Muslim jurists, Adl related specifically to an individual's character or personality, akin to 'probity'. In Islamic theology, Adl is another word for divine justice, although its definition can vary in interpretation.

Ahmad Hanbal

English: Ahmad Hanbal

Definition: Eminent third/ninth century Muslim scholar and Hadith specialist who founded the Hanbali School of Fiqh


English: Tangible asset 

Definition: Physical, material and tangible assets, including fixed (machinery, land, buildings) and current (inventory). Plural: Aayan.


English: Hired worker

Definition: An employee, hired worker or laborer. Someone who is paid a wage in return for services rendered.

Ajeer Khas

English: Special/private worker

Definition: An employee or worker hired by an employer on an exclusive basis for a specific job at a specified salary (Ajr or Ujrah) and for a defined period of time. For example, an accountant employed by a firm to manage its books. 

Ajeer Mushtarak

English: Independent/general worker

Definition: An independent contractor who works for him/herself and can provide services to multiple clients at the same time. For example, a builder, doctor, consultant or crafstman. 


English: commission or fee charged for services


English: the hereafter


English: virtue, morality and manners in Islamic theology

Akl Al Batil

English: The unlawful acquisition of wealth

Definition: The process of unjust enrichment or unlawful acquisition of wealth (Mal) through methods such as bribery, theft, fraud, games of chances or zero-sum games (Qimar) or interest (Riba). Mentioned in the Quran ("eating or usurping someone else’s property unjustifiably or illegally"). 

Akl Al Suht

English: The unlawful acquisition of wealth

Definition: A Quranic term defined as the process of illegally obtaining wealth (Mal or Tharwah) for example through bribery, corruption, interest (Riba), etc. 

Al Ajr Al Muta’aref Alayh

English: Prevailing market rate

Definition: The standard or accepted market price for a specific service.

Al Amin Al Khas

English: Trustee (special)

Definition: Someone who has been entrusted to hold the property of a third party for the purpose of safekeeping (Wadiah). 

Al Amin Al`amm

English: Trustee/secretary (general)

Definition: Someone who has been entrusted to hold the property of a third party for a reason other than safekeeping (Wadiah). For example, a tenant renting an apartment, or a Mudarib in a Mudarabah contract.  

Al Arbah Qabl Khasm Al Fawa’ed Wa Ad Dara’eb Wa Al Ihlak Wa Estihlak Ad Dayn

English: EBITDA (earnings before interest, taxes, depreciation and amortization)

Definition: An indicator of financial performance defined as total revenue minus expenses but still including interest, tax, depreciation and amortization (or net income plus). Often used to compare profitability between firms and industries because it equals out the impact of individual corporate financing and accounting decisions. 

Al As’hom Al Qiyadiya

English: Blue chip

Definition: A firm that is nationally recognized and financially stable, and is viewed as a reliable and safe investment especially during adverse economic conditions. 

Al Ghunm bil Ghurm

English: rationale of profit sharing

Definition: Especially with regard to financial partnership (Shirkah) arrangements

Al Hajz Ala Al Ruhunat Al Aqariya

English: Foreclosure

Definition: A legal process by which a lender attempts to recover the balance of a loan from a defaulting borrower by forcing the sale of the asset used as the collateral for the loan.

Al Iktitab Al Mutajawaz

English: Oversubscribed

Definition: A situation in which the demand for an initial public offering (IPO) of securities exceeds the total number of shares issued. Can also apply to a debt issuance in which the number of received orders exceeds the total value of debt issued. 

Al Kharaj Bil Daman

English: Reward linked to risk

Definition: Sourced from the Hadith, a maxim that essentially links risk to reward - thus, only he who bears a share of the liability is entitled to a share of the profit. 

Al Mithlu Bil Mithl

English: Like for like

Definition: Like for like, in the context of exchange transactons where similar commodities must be traded at equal measures. 

Al Motawasset Al Hissabi Li Seer Faedat Alard Wa Attalab Fima Bayn Al Bunuk

English: Swap rate

Definition: The fixed rate demanded in exchange for the uncertainty of paying a floating rate (such as Libor) over a period of time. 

Al Muba

English: Subject of sale

Definition: The item, asset or subject of a sale; the commodity being traded.

Al Shafi`I

English: Abū ʿAbdullāh Muhammad Idrīs Al-Shāfīʿī

Definition: A famous Muslim jurist who lived from 150-204AH (767-820AD). One of the four great Imams whose teachings founded the Shafie School of Fiqh (Madhhab).

Al Tamweel Mutanahi As Sighar

English: Microfinance

Definition: Financial services for low-income clients and small enterprises who lack access to traditional financing methods and banking services. 

Al Taqyim Al Waqi’ Ill Wadhe’ Al Mali (Lil Sharika) Bina Ala Al Qima As Soukiya

English: Mark-to-market  

Definition: A system of valuing assets by the most recent market price.

Al ’A’Ed ’Ala Al Usul

English: Return on assets

Definition: An indicator of corporate profitability generated by dividing a company's annual earnings by its total assets. 

Al ’A’Ed ’Ala Huquq Al Musahimeen

English: Return on equity

Definition: The sum net income returned as a percentage of shareholder's equity, it measures profitability by showing the return that the company has made through investment of shareholder money. Used as an indicator of efficiency. 

Al-wa’d bi al-bai’

English: promise to sell

Al-wa’d bi al-syira’

English: promise to buy

Alawa Se ’Ariya

English: Premium/payment

Definition: The difference between a fixed income security's face value at issuance and the higher price it is sold for. 


English: Shariah jurists
Alternate spelling: Ulema


English: reliability, trustworthiness, loyalty, honesty
Alternate spelling: Amana

Definition: An important value of Islamic society in mutual dealings. It also refers to deposits in trust, where a person may hold property in trust for another.


English: Agent

Definition: Someone who is compensated for performing a task or intermediary role. For example, the Mudarib in a Mudarabah contract.


English: agent

Definition: Someone who deserves compensation for completing a task, such as a mudarib in a Mudarabah or a zakat collector.


English: Trustworthy/trustee

Definition: A person or firm entrusted with the duty to hold and/or administer property or assets for a third party. 


English: Private property/possessions

Definition: Private property of value (such as wealth, assets etc) both tangible and intangible, over which the owner has exclusive and absolute rights.

Amlak Shar’iya

English: Legal assets

Definition: Tangible or intangible property or assets whose use is legal under Islamic/Shariah law. Wealth whose commercial value is not based on non-compliant or Haram activities or assets (such as pork, alcohol, gambling). Can also refer to legal tenders or rights to property or assets. 


English: Surplus wealth

Definition: A term found in the Quran and denoting wealth above what is required to meet legitimate needs on a modest scale. 


English: Real estate

Definition: Property including land and any physical property on that land (buildings, fences, wells, etc), and the natural resources of that land (including crops, minerals, water, flora, fauna, etc).


English: Contract

Definition: A valid contract according to Islamic law. The term specifically denotes a principle of contract law, as mandated by the Quran, which requires the terms of a contract between two Muslims to be binding. 


English: contract

Aqd Al Musaqah

English: Fruit farming partnership

Definition: A partnership whereby the owner of a fruit farm shares a percentage of produce with his employee in return for labor and irrigation activities.

Aqd Batil

English: Void or invalid contract

Definition: An invalid contract usually as the result of Haram or impermissible activities. 

Aqd Gair Mulzim

English: Non-binding contract

Definition: A non-binding contract in which either party has the independent right to revoke voluntarily without the consent of the other.

Aqd Mawquf

English: Suspended contract

Definition: A contract where the implementation/effectiveness is contingent upon a specific action or event occurring. 

Aqd Muawada

English: Commutative contract

Definition: A bilateral exchange contract where each counterparty both gives and receives an equivalent (ie a sale, purchase or lease contract). 

Aqd Mubadalah

English: Swap contract

Definition: A derivative contract whereby the parties exchange benefits in their proprietary financial instruments - for example, contracts to exchange the coupon payments from different bonds (ie a rate swap) - based on the exchange of a stream of cash flows (known as the 'legs' of the swap). 

Aqd Mulzim

English: Irrevocable contract

Definition: A contract that can only be revoked or canceled with the consent of the other party. 

Aqd Tabarru

English: Non-commutative contract

Definition: A transfer contract in Fiqh Muamalat whereby one party receives no return or compensation (for example, in the case of a gift (Hibah), loan (Qard) or guarantee (Kafalah)).


English: set of beliefs


English: Downpayment/deposit

Definition: A contract based on an advance payment that is counted as part of the purchase price of the completed acquisition; and which is retained by the seller if the sale is not completed, in order to provide compensation to the seller for honoring his obligation to cancel the sale at the buyer's behest. The term refers to both the contract and the downpayment itself.


English: Land


English: Offer

Definition: The offer made in a contract.


English: expert

Definition: Consultant in situations requiring an impartial, informed decision, such as the appraisal of property.


English: loan of small articles

Definition: Contract in which one party allows the other use of an asset for an indefinite period, without fee

Ariyat Al Aayan

English: Free/gratuitious loan

Definition: The loan of property or objects with no compensation in exchange - ie the gift of an item that is not consumed upon use but has the possibility of being returned.

Ariyat Al Manafe

English: Gratuitous loan of usufruct

Definition: Similar to Ariyat Al Aayan - a gratuitous loan, in this case of usufruct, with specific reference to the practice by the people of Madinah of assigning their palm trees to the poor for a specified period so they could benefit from the produce. In general, the people of Madinah were not allowed to exchange the fresh fruit from the trees for dried fruit due to the element of Gharar. However, the Prophet (pbuh) allowed the poor to sell their dried dates to tree owners in exchange for fresh fruit from the assigned trees during the specified time period. 

Ashbah An Nuquq

English: Liquid assets

Definition: An asset that can be rapidly converted to cash with little or no loss in value.

Asnaf Ribawiya /Sinf Ribawi

English: Ribawi commodities

Definition: Six commodities that are sold by weight and measure: gold, silver, wheat, dates, salt and barley. Ribawi items must be exchanged in equal measure and with immediate transfer of possession to avoid Riba


English: Shares

Definition: A type of security representing proportionate ownership in a corporation or financial asset, and usually comes with a proportionate claim on assets or earnings.

At Tahawwut An Naqdi Al Islami

English: Islamic currency hedge

Definition: A type of Islamic finance treasury arrangement used to mitigate currency exposure. 

At Tasnif Al I’timani Li Wada ’I’ Al ’Umlat Al Ajana-biya Tawilat Al Mada

English: Long-term foreign currency deposit rating

Definition: As described.

Awraq Malyah Muta’athera

English: Distressed securities

Definition: A financial instrument or security in a corporate or government entity that is under distress - usually meaning unable to meet its financial obligations and/or heading towards bankruptcy. Due to these conditions, these securities often experience a substantial reduction in value and are therefore attractive to investors seeking a bargain or willing to accept a higher risk. 


English: Evidence/verse

Definition: Literally means evidence, or sign. In the context of the Quran, relates to a verse - or a statement/paragraph marked by a number. Plural: Ayat. 


English: currency or ready money

Definition: Gold, silver, coins, notes and any other form of ready cash. Often contrasted with dayn.


Baha Asliya

English: Presumed permissibility or original permissibility

Definition: The idea of original permissibility: that in principle everything that is not specifically prohibited by the Shariah is in theory permissible. The scholar Shaykh Islam Taymiyah noted that: "It should be understood that in principle all things, of various types and categories, are generally Halal for human beings, and that they are Taahir (pure) and it is not forbidden for people to handle them and touch them."


English: Sale/commercial transaction

Definition: Literally means an oath of allegiance to a leader, as practiced by the Prophet (pbuh). In a commercial context, refers to a sale or contract of sale, and is often used as a prefix for various types of Islamic sale-based structures. 

Bai Ajil bi Ajil

English: delayed-for-immediate sale

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

Bai al Arboon

English: deposit-secured sale

Definition: 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 Arbun

English: Sale with a nonrefundable deposit

Definition: A sale including an advance downpayment or deposit with the condition that if the sale is completed, the downpayment will become part of the selling price. If the sale is not completed, the deposit will be forfeited. See also Arbun

Bai Al Ghaib

English: Secret/absent sale

Definition: The sale of absent or concealed goods. In Arabic, Ghaib means anything that is hidden in some manner and literally translates to 'the unseen'. 

Bai Al Hasah

English: Pebble sale

Definition: A type of sale prevalent in the Jahiliyyah (pre-Islamic) era where the object of sale was determined by throwing a pebble and taking whichever object it landed on. For example, the buyer would throw a pebble toward the selection on sale and take whichever one it hit. The contract is prohibited in Shariah due to the element of Gharar

Bai Al Inah

English: Sale with immediate repurchase (sale of appearance)

Definition: A sale contract with immediate repurchase. A contract of sale where an item is bought for cash and then sold to the same party for a higher price with deferred payments - essentially acting as a means of lending on interest. Essentially equates to a double sale and can comprise two agreements. First, the seller sells an asset to the buyer through a series of deferred payments. Second, the seller repurchases the asset again immediately at a lower price, in cash. The difference in price between the immediate cash repurchase and the higher total deferred payments is proft for the original seller, and can be viewed as the equivalent of interest. Equating to a sale and buyback agreement, the contract is prohibited by most scholars. However, some jurisdictions (notably Malaysia) have been more lenient in allowing the practice - upon which, for example, Islamic credit cards have been established. The contract is similar to Tawarruq; however, Tawarruq includes a third party or intermediary.

Bai al Inah

English: sale and buy-back

Definition: 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 Bil Kali

English: Credit for credit (deferred loan)

Definition: A contract of sale in which both the payment and delivery are deferred - in essence, the sale of debt for debt. This is a prohibited sale, as the Shariah prohibits the exchange of a delayed countervalue for another delayed countervalue (Ijma). Five types of this sale are identified in the Fiqh Muamalat - the best known of which is an exchange whereby a lender extends a debtor's repayment period in return for an increase in the debt amount owed. This increase on the principal amounts to Riba (interest) and is Haram.

Bai al kali’ bi al kali’

English: sale of debt for a debt

Definition: 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 Khiyar

English: Sale with option

Definition: A contract of sale embedded with an option that allows either party to withdraw within a specified time frame. The period of limitation for the underlying option is a matter of dispute among Islamic scholars, with some identifying three days as the maximum period and others claiming that the Shariah does not stipulate an established period of limitation. Due to the embedded Khiyar (option), the sale contract does not come into immediate effect but only becomes binding once the Khiyar option period expires and assuming neither party has exercised their right to revoke.

Bai Al Khuluw

English: Sale of concession/usufruct

Definition: A type of leasing contract representing the sale of the right or concession to utilize property for a specified price and period of time. The beneficiary pays rent (Badal). Essentially, the sale of usufruct (Manfaah) of property. For example, buying the right to use machinery in a leased factory for a certain number of years in return for Badal/rent. In Arabic, Khuluw technically means 'key money'. 

Bai Al Muallaq

English: Suspended sale

Definition: A contract of sale where delivery of the product is conditional on certain events or actions, with the contract suspended until the conditions are fulfilled. This creates uncertainty as to the final execution of the contract, which causes harm to the buyer, and therefore widely prohibited. 

Bai Al Mudhaf

English: Future sale

Definition: A contract of sale whereby the seller agress to sell the item at a pre-determined price on a specified future date, and the buyer agrees. Gharar occurs when price levels or the item description changes by the time the future date arrives, causing disputes and harm to either party. 

Bai Al Salaf

English: Prepaid sale

Definition: Also known as Bai Al Salam. A sale contract representing an agreement between two parties where the buyer pays in advance a specified price (Al Thaman) for a commodity to be delivered at a future date. In other words, the purchase of a product for immediate payment with deferred delivery. The contract is an exception to the rule that the object of sale must exist at the time of the sale. The price of the purchased item is known as the Salaf (or Salam) capital, and cannot be called back before it is due (unlike Qard). The delivery (deferred) is known as Muslam Fihi. The seller is Muslam Ilaihi and the buyer is Muslim. 

Bai Al Salam

English: Deferred delivery sale

Definition: See Bai Al Salaf.

Bai al Salam

English: future delivery

Definition: 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 Al Sarf

English: Exchange of currency

Definition: A contract of exchange for currency/money. Tightly regulated due to the possibility of generating Riba (interest). The rules of Sarf derive from the Hasith: "Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt - like for like, equal for equal, payment being made on the spot. If the species differ, sell as you wish provided that payment is made on the spot".

Bai Al Tawliya

English: Sale at cost price

Definition: Sale at cost price without profit or loss. 

Bai Al Wadhia

English: Discount sale

Definition: A sale where the item is sold at a loss (a price lower than cost price). The purchaser is informed of the discount and the original acquisition cost. 

Bai Al Wafa

English: Repurchase option

Definition: A contract of sale stipulating that the seller has the right to repurchase the underlying asset (such as property ) through refunding the purchase price. This right of redemption is based on the understanding that the buyer will give back the original property in return for the original purchase price. Wafa translates as honor, as it is an honorable understanding. The contract is viewed as impermissible by many jurists - although some Asian scholars believe it is permissible and have used it to develop products for the Islamic capital market.

Bai Atan Fi Baiah

English: Two sales in one

Definition: Explicitly prohibited by the Prophet (pbuh). "Two sales/transactions/conditions in one" are interpreted differently by various Islamic jurists (Faqih, or plural Fuqahah, experts in Fiqh). 

Bai Bil Wafa

English: Redemption sale

Description: Sale which gives the seller the option to repurchase the property by paying the purchase price. Impermissible according to the OIC Fiqh Academy, as the contract is considered a circumvention allowing interest to be paid on a loan. However the Shariah Advisory Council in Malaysia rules it permissible as does the Hanafi Mejelle.

Bai Bithaman Ajil

English: Deferred payment sale

Description: A transaction to finance an asset on a deferred payment basis with a pre-agreed payment period. Similar to Murabahah financing. 

Bai Bithaman Ajil

English: deferred payment sale
Alternate spelling: Bai Muajjal

Definition: 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

English: debt financing

Definition: 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

English: supply sale

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

Bai Muajjal

English: deferred payment sale Alternate spelling: Bai Bithaman Ajil Definition: 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

English: open bidding trading

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

Bai Wafa

English: sale and buy-back

Definition: 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

English: treasury

Band Al Qima Al Adela Assaliba Lil Istithmar

English: Negative investment fair value reserve

Description: The cumulative net change in the fair value of sellable financial assets, up to the point where the investment is derecognized or the assets are impaired.

Baramej Al Wala/Al Mukafaat

English: Loyalty program

Definition: Structured marketing campaigns designed to reward loyal customers.

Barnamej Sanadat Mutawassetat Al Ajal

English: Medium-term note program (MTNP)

Definition: A program of corporate notes with maturities usually ranging from one to 10 years, used by a company to ensure constant cash flows from its debt issuance and allowing it to tailor debt issuance to meet corporate needs. A MTNP allows a firm to register with the relevant regulator just once instead of every time for each maturity issuance. 


English: Void or invalid

Definition: Directly translated as 'falsehood', and describing a nullified or invalid contract as according to Shariah. In contract law, the antonym to Batil is Sahih, which translates as 'authentic'. 


English: null and void



English: Weak

Definition: A term used to describe a Hadith whose authority is doubted.

Daf Muqaddam

English: Advance payment

Definition: Payment in advance for deferred delivery.


Contract of guarantee, security or collateral (risk of loss)

Definition: A contract providing financial coverage in the event of destruction or damage. One of the two basic insurance relationships toward property (alongside Amanah). Daman equates to risk of loss, and the Damin acts as guarantor and bears the same risk of loss as the owner. In contrast, the Amin (in Amanah) is held as the trustee and is not held liable unless shown to be in breach of trust.

Daman Iktitab

English: Underwrite

Definition: The process by which a lender or financial service assesses the creditworthiness of a potential customer - essentially, the process of issuing insurance policies (by signing and accepting liability in the case of loss or damage). Securities underwriting refers to the process by which investment banks raise capital from investors on behalf of issuers.


English: necessity

Definition: Muslims may disregard aspects of Shariah laws in order to save their lives, or to preserve the Islamic community.


English: debt
Alternate spelling: Duyun

Definition: Wealth that one is required to pay back to another

Ddirasat Al Jadwa Al Iqtisadiya

English: Feasibility study

Definition: An assessment of the practicality of a proposed plan. 

Dha wa ta ajjal

English: Creditor’s debt Definition: A creditor’s forfeit on part of the debt when the debtor settles the balance of his debt earlier than scheduled.


English: guarantee

Definition: A contract of guarantee whereby a guarantor shall underwrite any claim and obligation that should be fulfilled by an owner of the asset. This concept is also applicable to a guarantee provided on a debt transaction in the event a debtor fails to fulfill his debt obligation.


English: liability

Definition: The concept may be likened to a virtual liability container that every responsible person has, which is constantly being filled with rights and obligations, such as the obligation to repay someone.


English: Injustice/exploitation

Definition: Unjust or unfair action or treatment, a violation of the rights of others, not providing proper recompense in an exchange.


English: Dinar

Definition: An early Islamic gold coin used in trading throughout Islamic history. According to Islamic law, a dinar is a pure gold coin weighing 72 grains of barley, or one Mithqal (around 4.44 g) while the silver Dirham is created to a weight ratio of 7:10 (yielding coins of around 3.15 g pure silver). The Islamic Dinar is the unit of account for the IDB and is equivalent to one special drawing right (SDR) of the IMF. As of 2011, the composition of currencies in the SDR basket denominating in Islamic Dinar were US$ 41.9%, EUR 37.4%, GBP 11.3% and JPY 9.4%. In 2002, the Malaysian prime minister proposed a gold dinar standard for use as a standardized currency throughout the Islamic world. 


English: unit of currency

Definition: A unit of currency, usually a silver coin, used in the past in some Muslim countries and still used in some Muslim countries today, for example Morocco and the UAE.


English: Compensation/blood money

Definition: The financial compensation paid to a victim or the heirs of a victim in the case of murder, manslaughter, bodily harm or property damage. An alternative punishment to Qisas (equal retaliation). Women are typically valued at half the rate of men. 



English: Fraud

Definition: A form of fraud or deception (either in word or deed) with the intention of deceiving or inducing a party into making a contract. Prohibited by the Shariah



English: to flourish

Definition: Success as measured in this world and Akhirah.


English: Shariah jurist
Alternate spelling: Fuqaha


English: poor person
Alternate spelling: Fuqara’

Fard al Kifayah

English: socially obligatory duties
Alternate spelling: Fard Kifaya

Definition: A collective duty of Muslims. The performance of these duties (for example funeral prayers) by some Muslims absolves the rest from discharging them. This term covers functions which the community fails to or cannot perform and hence are taken over by the state, such as the provision of utilities, or the building of roads, bridges and canals.


English: Obligatory

Definition: A religious duty commanded by God. 


English: Corrupt or defective

Definition: A religious concept under Shariah, meaning 'corruption'. In contract law, refers to a false or defective contract. However, unlike a Batil contract (which is invalid), a Fasid or false contract could still be taken through to completion. 


English: unsound or unviable

Definition: A forbidden term in a contract, which consequently renders the contract invalid.


English: dissolution of contract

Definition: Agreement canceled voluntarily by the parties. Compare Infisakh, used for cancelations that occur outside of the will of the contractual parties.


English: religious decree
Alternate spelling: Fatwah, Fatawa

Definition: Islamic legal opinion based on Quranic, Sunnah and Islamic legal precedent or the Shariah.


English: Islamic jurisprudence

Definition: The science of the Shariah. An important source of Islamic economics.

Fiqh al-muamalat

English: Islamic commercial jurisprudence


English: dealing with someone else’s property without permission

Definition: An example is when X negotiates and “closes” a deal with Y in which he sold some machinery without the owner of the machinery having made him his wakeel. X would be described as fuduli.



English: Gulf Cooperation Council

Definition: A political alliance and trade bloc consisting of six states of the Arabian Gulf: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.


English: Mistake

Definition: A negative element that can affect the validity of `aqad. In Arabic, it connotes error in perception.


English: uncertainty

Definition: One of three fundamental prohibitions in Islamic finance (the other two being riba and maysir). Gharar is a sophisticated concept that covers certain types of haram uncertainty in a contract. It is an exchange in which one or more parties stand to be deceived through ignorance of an essential element of the exchange. Gambling is a form of gharar because the gambler is ignorant of the result of the gamble. The prohibition on gharar is often used as the grounds for criticism of conventional financial practices such as short selling, speculation and derivatives.


Alternative spelling = Gharimun 

A debtor who does not have the funds, after repayment of his debt, would not equal the nisab. The Shafi`i and Maliki jurists divide the gharimun into two types: (i) those whose debts were incurred in their own benefit; and (ii) those whose debts were incurred benefiting others. The gharimun are one of the eight groups mentioned in the Quran as legitimate recipients of zakah funds.


English: forfeiture

Definition: Wrongful appropriation of property by force


English: Usurper

Definition: Someone who wrongfully takes the property or entitlement of others.


English: Fraudulent deception

Definition: A fraudulent practice where one party in a commutative contract attempts to deceive the other into paying a higher price or trading on unjust or unfair terms. 


Habal Habala

English: Uncertain outcome agreement

Definition: A prohibited sale previously practiced in the pre-Islamic era (Jahiliyyah) where the foetus of a female camel was sold while still in the womb. Some scholars define this as a spot sale of the foetus itself, while others classifed it as a deferred sale with the price paid at the time of birth. In either case, the contract is prohibited because it is either the sale of an unknown and non-deliverable item (the foetus) or the sale of an item with the payment deferred to an unspecified date (because the time of birth cannot be known).


English: the Prophet's sayings and commentary on the Quran
Alternate spelling: Ahadith


English: pilgrimage to Mecca

Definition: There is a duty on every Muslim who is financially and physically able to carry out Hajj, the fifth pillar of Islam, at least once in his lifetime. The pilgrimage takes place in the week from the 8th until the 13th day of the 12th Islamic month of Dhul Hijjah.

Hak Tamalluk

English: ownership right

Definition: A tradable asset in the form of ownership rights.


English: lawful, permissible

Definition: The concept of halal has spiritual overtones. In Islam there are activities, professions, contracts and transactions that are explicitly prohibited (haram) by the Quran or the Quran. All other activities, professions, contracts and transactions are halal. This concept differentiates Islamic economics from conventional economics. In western finance all activities are judged on economic utility. In Islamic economics, spiritual and moral factors are also involved – an activity may be economically sound but may not be allowed in Islamic society if it is not forbidden by the Shariah.

Hamil Hisab Istithmar

English: Investment account holder

Definition: An investor who places funds with an Islamic institution for investment purposes on a profit and loss-sharing Mudarabah basis. 

Hamish jiddiyyah

English: security deposit

Definition: Sum paid by a party who places an order to purchase, as security for his promise.


English: Islamic school of law

Definition: Islamic school of law founded by Imam Ahmad Ibn Hanbal. Followers of this school are known as Hanbalis.


English: Islamic school of law

Definition: One of the major Islamic school of law, founded by Imam Abu Hanifa. Followers of this school are known as Hanafis.

Haq Maliy

English: rights on the financial assets

Definition: Haq Maliy are rights on the financial assets. Examples of such rights are haq dayn (debt rights) and haq tamalluk (ownership rights).


English: truth, right

Definition: A right which a party possesses, for example, the creditor’s right to payment.

Haqq Ash Shufa

English: Right of pre-emption or right of first refusal

Definition: The right of pre-emption in sales transactions;. For example, offering select shareholders in a corporation the right to purchase additional shares in the company before the general public has the opportunity.

Haqq Maly

English: Financial right

Definition: Right relating to financial assets/wealth, such as Haqq Dayn (debt rights) and Haq Tamalluk ownership rights).


English: unlawful, forbidden

Definition: Activities, professions, contracts and transactions that are explicitly prohibited by the Quran or the Sunnah. See halal above.


English: bill of exchange, remittance
Alternate spelling: Hiwala

Definition: A contract which allows a debtor to transfer his debt obligation to a third party who owes the former a debt. The mechanism of Hawala is used for settling international accounts by book transfers, thus obviating the need for a physical transfer of cash.


The length of time that must pass before a Muslim in possession of funds equaling or exceeding the exemption limit (nisab) must pay zakat on his wealth. In the case of cash, gold and silver, it is one Islamic year, i.e. a lunar year of approximately 354 days.


English: gift

Definition: A gift voluntarily donated in return for a loan provided or a benefit obtained.

Hibah al-ruqba

English: conditional hibah

Definition: The gift donor stipulates that the recipient is to receive the gift upon the death of the former.

Hibah al-‘umra

English: contingent hibah

Definition: Hibah contingent on the lifetime of the gift donor or the recipient.


English: forbidden structure
Alternate spelling: Hiyal

Definition: A transaction which appears permissible, but is in fact structured in an un-Islamic way.

Himaya Tijariya

English: Protectionism

Definition: The economic policy of controlling trade between states (countries) through methods such as tariffs on imported goods, restrictive quotas, and other government regulations theoretically designed to promote fair competition.


English: regulatory duty

Definition: The necessary steps in order to maintain a fair and orderly marketplace.

Hissab khas

English: Escrow account

Definition: A temporary pass through account held by a third party during the process of a transaction between two parties, and/or sometimes used to pay obligations such as property taxes and insurance premiums

Hissabat Al Wada E Bi Nidham Al Murabahah Fi As Sela Al Awaliya

English: Commodity Murabahah deposit

Definition: A Shariah compliant investment deposit whereby deposits are invested in the buying and selling of commodities and the profits/losses are shared. 


English: Islamic ruling
Alternate spelling: Ahkam



English: Discharge

Definition: The withdrawal of rights, such as those to collect payment.


English: rebate

Definition: When a person withdraws the right to collect payment from a borrower.


English: Islamic Financial Services Board

Definition: A Kuala Lumpur-based international standard-setting organization that was set up in 2003 to promote the stability of the Islamic financial services industry by issuing global prudential standards and guidelines. The IFSB helps regulators govern Islamic financial institutions in compliance with Basel II and evolving global standards.


English: hoarding

Definition: The prohibited practice of purchasing essential commodities, such as food and storing them in anticipation of a price increase.

Ihtiyati Al Mukhatara Fil Istithmar

English: Investment risk reserve

Definition: A reserve created by an Islamic bank by retaining a specific amount from the income of investment account holders, as a buffer against future potential losses. 

Ihtiyati Ilzami Lil Bunuk

English: Reserve requirements

Definition: A central bank regulation setting minimum reserves of customer deposits and notes that commercial banks must hold (rather than lending out). Also known as cash reserve ratios. These can also be stipulated by supranational or global bodies (such as the Basel regulations).

Ihtiyati Muadalat Al Ribh

English: Profit equalization reserve

Definition: A reserve created by an Islamic bank by appropriating a specific amount out of the Mudarabah income, before allocating the share of Mudarib. By so doing, the bank aims to maintain a certain level of return on investment to the benefit of its investment account holders and equity owners, and avoid fluctuation. 


English: offer in a contract

Definition: Also see Qabul


English: leasing
Alternate spelling: Ijara

Definition: A lease agreement whereby a bank or financier buys an item for a customer and then leases it to him over a specific period, thus earning profits for the bank by charging rental. The duration of the lease and the fee are set in advance. During the period of the lease, the asset remains in the ownership of the lessor (the bank), but the lessee has the right to use it. After the expiry of the lease agreement, this right reverts back to the lessor. This is a classic Islamic financial product.

Ijarah Mawsufah fi Dhimmah

English: forward lease

Definition: If there is a reasonable expectation that something will be made, then we may structure a forward lease for which rent is collected today. The lessor, however, must refund the rent if he fails to deliver the object of the lease.

Ijarah Muntahiya Bil Tamleek

English: Lease ending with ownership

Definition: See Ijarah Wa Iqtina.

Ijarah Thumma Bai

English: leasing to purchase

Definition: The principle governing an Ijarah contract at the end of the lease period, when the lessee buys the asset for an agreed price through a purchase contract.

Ijarah Wa Iqtina

English: Lease and possess

Definition: A lease and purchase transaction. An instrument through which a lender purchases reusable merchandise such as planes, cars or property and then leases them to customers in return for an agreed rental fee and agreement to purchase at the end of the rental period. Ownership is transferred through a separate contract. 

Ijarah wa Iqtina

English: buy-back leasing

Definition: A hire and purchase mode of financing where an Islamic bank finances equipment, a building or other facility for the client against an agreed rental, together with an undertaking from the client to repurchase the facility at the end of the contract. The rental and the purchase price are fixed so that the bank gets back its principal sum along with some predetermined profit.


English: consensus

Definition: The unanimous decision of all or the majority of leading jurists on a Shariah matter in a certain age. Ijma has traditionally been recognized as an independent source of law, along with the Quran, Sunnah and Qiyas.

Ijmali Aqsat At Tamin Al Muktataba

English: Gross written premiums

Definition: The total premiums (direct and assumed) written by an insurer before deductions for reinsurance and ceding commissions. Includes additional and/or return premiums. 


English: effort, exertion, industry

Definition: A faqhi's endeavor to formulate a rule on the basis of evidence found in the Islamic sources.


English: monopoly


English: divergence of opinion among jurists


English: hoarding wealth by not paying zakat on it


English: legal effective cause

Definition: Basis for applying analogy in determining the permissibility or otherwise of a transaction.


English: conviction, faith or belief


English: financial partnership


English: Spending/disbursement

Definition: Spending to please Allah, without asking for anything or expecting anything in return. Used in the Quran. Differs from Zakat, which is obligatory. 


English: Cancellation of a contract

Definition: The mutually agreed cancellation or termination of a contract. 


English: moderation


English: Partnering

Definition: A contract of partnership.


English: reform


English: wastefulness

Definition: Lawful spending but exceeding moderation in quality or quantity; includes spending on objects that are incompatible with the economic standard of the majority of the population and spending on superfluous objects while necessities are not met. (Also see Tabzir)


English: guiding choice

Definition: Judicial preference for one legal analogy over another, usually when public welfare is concerned.


English: Acquisition

Definition: To take possession, to acquire.


English: recurring sale

Definition: Different quantities are bought from a single seller over a period of time. Sometimes it is also referred to transactions whereby seller delivers different quantities in different installments to complete the full purchase. Some divergence among the scholars in terms of the timing of fixation and pricing.


English: advance purchase of goods or buildings
Alternate spelling: Istisna’a, Istisna’ah

Definition: A contract of acquisition of goods by specification or order, where the price is paid in advance, or progressively in accordance with the progress of a job. For example, to purchase a yet to be constructed house, payments would be made to the builder according to the stage of work completed. This type of financing, along with Salam, is used as a purchasing mechanism, and Murabahah and Bai Bithaman Ajil are for financing sales.


English: Investment capital

Definition: Funds invested in a firm or enterprise for the purposes of furthering its business objectives. Capital investment may also refer to a firm's acquisition of capital assets or fixed assets such as manufacturing plants and machinery that are expected to be productive over many years.

Ittifaq Dhimn

English: pre-agreed contract

Definition: The sale and repurchase of an underlying asset. Prices are agreed in advance, prior to the contract, to allow the bidding process to take place.

Ittifaq Miayari Li Hisabat Al Wadae Bi Nidham Al Wakala

English: Standardized Wakalah deposit agreement

Definition: A Shariah compliant investment contract through which an investment agency offers an alternative to the commodity Murabahah structure for deposits. See Wakalah or Wakalah Istithmar.



English: pre-Islamic period

Definition: The era just before the coming of prophet Muhammad and, more generally, to the state of affairs which characterized this era, which was plagued by shirk (the crime of associating partners with Allah), infanticide, tribal strife and so on.


English: ignorance (of morality or divinity)

Ji Alah

English: pre-agreed contract

Definition: A unilateral contract promising a reward for a specific act or accomplishment, also known to be a contract of reward.


English: stipulated price for performing a service
Alternate spelling: Ju’ala

Definition: Applied by some in Islamic banking. Bank charges and commission have been interpreted to be ju'alal by the jurists and thus considered lawful.



English: guarantee

Definition: Shariah principle governing guarantees. It applies to a debt transaction in the event of a debtor failing to pay.


English: Guarantor

Definition: A person who guarantees to pay for someone else's debt if he or she should default on a loan obligation, in a Kafalah agreement. 


English: Expert/consultant

Definition: An expert who is consulted in situations that require an impartial, expert decision. For example, a property appraisor or surveyor. 

Khalif or khalifa

English: ruler, steward, custodian
Alternate spelling: khulafaa


English: Dangerous risk

Definition: A type of Gharar: where the liability in a contract is uncertain, out of control , undetermined or contingent. 

Khayar An Naqd Al Islami

English: Islamic currency option

Definition: An Islamic treasury arrangement between an Islamic bank and a counterparty in order to mitigate or manage foreign exchange risk. The counterparty purchases a commodity on the basis of credit Murabahah using local currency, then sells it on a Murabahah basis with the price paid either in local currency or an alternate currency. The structure replicates a conventional currency option in a Shariah compliant way, with the two tranches of the transaction paid in different currencies and pre-agreed in advance. 


English: fraud

Definition: A form of fraud, either in word or deed by a party to the trading contracts with the intention of inducing the other party into making a contract. This is prohibited according to the Shariah.


English: deception

Definition: Refers to deception by not disclosing the truth or breaching an agreement in a hidden way. This is prohibited according to the Shariah.


English: power to annul contract

Definition: The option to rescind a contract upon the appearance of a defect.


English: Combination

Definition: The permissible combination (mixture) of multiple asset classes in one security (such as real estate, debt and equity, or a capital structure combining equity and debt) which may not all be 100% Shariah compliant. This is usually defined as a limit of one-third or 33% non-compliant content.


Loan (with service charge)

Some Islamic banks give loans with service charges. The Council of the Islamic Fiqh Academy has resolved that it is permitted to charge a fee for loan-related services offered by an Islamic bank, provided that the fee relates to service-related expenses. The service charge can only be calculated accurately after all administrative expenditure has been incurred (at the end of the year). However it is permissible to levy an approximate charge on the client, and then reimburse/claim the difference when the actual expenses are known.


English: Found property

Definition: Property which is found by someone else and taken for the purpose of preserving it, in the manner of a trust. It is a positive action to take custody of the lost item, and some scholars regard it as a binding duty should the item be of a kind that will perish if not preserved. The period of preservation is usually one year, although this can be extended to three. The finder should advertise the finding of the item regualrly and if, at the end of the period, no one has claimed it, then the finder can make use of the item himself (if he is insolvent) or must give it to charity (if he is solvent). 



English: Islamic school of law

Definition: Islamic school of law founded by Imam Malik Ibn Anas. Followers of this school are known as Maalikis.


English: Measure

Definition: A dry measure equal to 1/4 sa that was used during the time of the Prophet (pbuh)


English: School of classical Islamic jurisprudence

Definition: A school of thought within Fiqh. Traditonally, there were four Madhhab (or Mazhab) followed by the majority of Muslims throughout Islamic history. Currently, eight are acknowledged: Hanafi, Maliki, Shafie, Hanbali and Zahiri (Sunni); Jafari and Zaidi (Shia); and Ibadi.


English: way of going
Alternate spelling: Madhahib

Definition: A fiqh school or orientation characterized by differences in the methods and therefore in the Shariah rulings that are deduced from them. There are four well-known madhahib among Sunni Muslims whose names are associated with the classical jurists who are said to have founded them (Hanafi, Maliki, Shafi`i and Hanbali).


English: Bridal gift

Definition: A mandatory payment from the groom or groom's father, usually of money or possessions, to the bride upon her marriage (that legally becomes the property of the bride). 

Makhatir Tuhaddid An Nidhan Al Mali

English: Systemic risk

Definition: The risk of an entire financial system or market collapsing/failing.


English: detested

Definition: An action that one is rewarded for avoiding, but not punished for committing.


English: Capital or wealth

Definition: Valuable item that can be gainfully used according to the Shariah.


English: wealth that has commercial value


English: Ownership/property

Definition: Wealth, money, property; any valuable thing that can be possessed. Mulkiya is often used to refer to an ownership certificate of a specific thing, such as a car.


English: Recommended

Definition: Actions which are recommended or virtuous, but while rewarded for their completion can be omitted without consequences.


English: Usufruct

Definition: Essentially, the right of an individual to use something that belongs to someone else - either free or for a fee. A benefit derived from an asset leased or provided - or more broadly, the right to use a specific object which belongs to someone else. Manafee (plural) are usually transferred throught the Ijarah contract in return for a rental sum. 


English: beneficial ownership

Definition: Usufruct associated with a given property, especially in leasing transactions. In an automobile lease, for example, “manfa’ah” might be used to describe the benefit which the lessee derives from the use of the car for the duration of the lease (as opposed to the actual ownership of the vehicle).


English: Shariah compliant property mortgage in the UK


English: general objectives of Islamic law


English: public good or benefit


English: Bank

Definition: A financial intermediary that creates credit by lending money to a borrower. 


English: Responsibilities

Definition: An obligation arising from a previous transaction or action, settled through the transfer or use of assets, services or other economic benefits.


English: gambling

Definition: One of three fundamental prohibitions in Islamic finance (the other two being riba and gharar). The prohibition on maysir is often used as grounds for criticism of conventional financial practices such as speculation, conventional insurance and derivatives.


English: A destitute person

Definition: A recipient of Zakat, destitute and possesses nothing. 


English: Covenant

Definition: A pact or binding agreement between two or more parties. 


English: goods that can be returned in kind

Mizan Al Mua Amalat Al Jariya

English: Economic current account

Definition: A key indicator of the financial health of an economy. Calculated as the balance of trade (goods and services exports less imports) plus net income from abroad and net current transfers.

Muaddal Ad Dayn Ila Ras Al Mal

English: Debt-to-equity ratio

Definition: A financial ratio that indicates the proportion of shareholders' equity and debt used to finance a firm's assets. Also known as gearing or leverage. 


English: economic transaction
Alternate spelling: Mu'amalah, Mu'amalat, Muamalah

Definition: The lease of land or fruit trees for money, or for a share of the crop.

Muamalat Muharrama

English: Unlawful transaction

Definition: Muamalat is another name for Mudarabah, a partnership in profit. Muamalat Muharrama indicates an unlawful or impermissible transaction whereby the transaction (sale, lease, rent, etc) is done without the knowledge or consent of all parties - for example, when property is rented without the knowledge of the true owner, or the transacting party is not the legal agent or Wakeel of the owner. 

Muashir Murajjah Bil Qima As Suqiya Lil As-hum

English: Cap-weighted index

Definition: Also known as a market-weighted index, where the individual components are weighted according to their market capitalization with larger components carrying a higher percentage weight. 


English: lawful objects


English: trust financing, profit sharing
Alternate spelling: Mudaraba, Modaraba, Modarabah

Definition: An investment partnership, whereby the investor (the rab al maal) provides capital to the entrepreneur (the mudarib) in order to undertake a business or investment activity. While profits are shared on a pre-agreed ratio, losses are born by the investor alone. The mudarib loses only his share of the expected income. The investor has no right to interfere in the management of the business, but he can specify conditions that would ensure better management of his money. In this way Mudarabah is sometimes referred to as a sleeping partnership. A joint Mudarabah can exist between investors and a bank on a continuing basis. The investors keep their funds in a special fund and share the profits before the liquidation of those financing operations that have not yet reached the stage of final settlement. Many Islamic investment funds operate on the basis of joint Mudarabah.

Mudarb Al Yawm Al Wahid

English: Day trader

Definition: The practice of buying and/or selling financial instruments within the same day period, with all positions being closed before close of markets each day.


English: entrepreneur in a Mudarabah contract

Definition: The entrepreneur or investment manager in a Mudarabah who puts the investor's funds in a project or portfolio in exchange for a share of the profits. A Mudarabah is similar to a diversified pool of assets held in a discretionary asset management portfolio.


English: equal, unlimited partnership


English: qualified professional who issues fatawa, usually in response to questions posed


English: Plantation contract

Definition: A type of partnership in which a land-owning party offers a piece of bare land (no trees, for example) for the counterparty to cultivate (ie plant trees) in return for a common share of the trees, produce and land. Essentially a type of Mudarabah specific to plantations. Mugharasah (or Munasabah) is an Arabic term meaning plantation.


English: legal expert or a jurist who expends great effort in deriving a legal opinion or interpreting the sources of the la


English: Sharecropping

Definition: A transaction whereby a plot of land is rented in return for a share of its yield (Ghallah). The worker provides the seeds, labor and expertise while the landowner provides the land through an Ijarah lease and the rent is paid in kind through the produce from the land. The Shafie school considers this contract impermissible as the rent cannot be pre-determined.

Mukhassassat Ihtiyatiya

English: Prudential provision

Definition: Expenses charged against a bank's income or capital, which are set aside for the event of loan loss provision, impairment provision, bad debt provision and so on.

Mukhassassat Inkhifad Al Qima

English: Impairment provisions

Definition: See Mukhassassat Ihtiyatiya.

Mulkiyat Khadamat

English: Service right

Definition: The right (Haqq) to a service held by a purchaser. These services can include education, travel, transportation and so on; and the service rights can be securitzed through a pre-sale with Sukukholders receiving either periodic distribution of underlying payments or service delivery. 

Mulkiyat Mushtarakah

English: Cross-holdings

Definition: The ownership of the securities of listed corporations by other listed corporations.


English: Sukuk for specific projects

Definition: This technique allows a bank to float what are effectively Islamic bonds to finance a specific project. Investors who buy Muqarada bonds take a share of the profits of the project being financed, but also share the risk of unexpectedly low profits, or even losses. They have no say in the management of the project, but act as non-voting shareholders.


Definition: Debt settlement by a contra transaction


English: cost-plus financing
Alternate spelling: Morabaha, Morabahah, Murabaha

Definition: A form of credit that enables customers to make a purchase without having to take out an interest-bearing loan. The bank buys an item and sells it to the customer on a deferred basis. The price includes a profit margin agreed by both parties. Repayment, usually in installments, is specified in the contract. The legality of this financing technique has been questioned because of its similarity to riba. However, the modern Murabahah has become the most popular financing technique among Islamic banks, used widely for consumer finance, real estate, the purchase of machinery and for financing short-term trade.

Murabahah Aksiya

English: Reverse Murabahah

Definition: An instrument used to obtain immediate cash. Similar to a standard Murabahah but with an extra tranche. A buyer purchases a commodity from a seller on a deferred payment basis, and sells the same commodity to a third party for immediate payment. 


English: agricultural contract

Definition: A contract in which the owner of agricultural land shares its produce with another person in return for his services in irrigating the garden.


English: general sale

Definition: The price of the commodity in question is reached through bargaining.

Musharak Fi Ar Ribh Wal Khasara

English: Profit and loss-sharing

Definition: Financing structures based on the principle of Riba-free lending, whereby the liability and profits are shared - usually featuring the Mudarabah and Musharakah partnership contracts.


English: joint venture, profit and loss sharing
Alternate spelling: Musharaka

Definition: An investment partnership in which all partners are entitled to a share in the profits of a project in a mutually agreed ratio. Losses are shared in proportion to the amount invested. All partners to a Musharakah contribute funds and have the right to exercise executive powers in that project, 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.

The two main forms of Musharakah are:

Permanent Musharakah: an Islamic bank participates in the equity of a project and receives a share of the profit on a pro rata basis. The length of contract is unspecified, making it suitable for financing projects where funds are committed over a long period.

Diminishing Musharakah: this allows equity participation and sharing of profits on a pro rata basis, and provides a method through which the bank keeps on reducing its equity in the project, ultimately transferring ownership of the asset to the participants. The contract provides for payment over and above the bank's share in the profit for the equity held by the bank. Simultaneously the entrepreneur purchases some of the bank's equity, progressively reducing it until the bank has no equity and thus ceases to be a partner.

Musharakah mutanaqisah

English: partnership

Definition: One of the partners promises to buy the equity share of the other gradually until the title is completely transferred to him.


English: Meritorious

Definition: Actions whose status of approval in Islamic law falls between Mubah (neither encouraged nor discouraged) and Wajib (compulsory). Recommended, but not essential. See Mandup

Mustahaqqat Ash Sharika Lada Al Ghayr

English: Receivables

Definition: Amounts owned to a business or corporation, categorized as assets on the balance sheet.


English: Investor

Definition: Someone who allocates capital in the expectation of a future financial return. 


English: unrestricted


English: Mutual promise

Definition: A mutual promise.


English: Bartering fresh fruit for dry

Definition: The selling of fresh fruit (without measuring it) for something of an estimated equivalent (ie dried fruit). Prohibited because of the element of Gharar as the fresh fruit cannot be measured.


English: agricultural contract Definition: A contract in which one person works the land of another person in return for a share in the produce of the land.


English: share-cropping

Definition: An agreement in which one party agrees to allow a portion of his land to be used by the other in return for a part of the produce of the land.



English: deception

Definition: The prohibited practice of deceiving and inciting a potential buyer during the course of pre-sale negotiations or bidding by egging him on.


English: Currency

Definition: Refers to money used as a medium of exchange - in Islam, limited to gold and silver.

Naqs Sanawi

Engliah: Annual deficit

Definition: The difference between total government revenues and total expenditure .


English: exemption limit

Definition: Exemption limit for the payment of zakat, which differs for different types of wealth.

Nisbat Al Arbah Ila Al Makhater

English: Risk-reward ratio

Definition: The relationship between the amount of risk and the amount of return - usually seen as directly proportionate. Can be calculated mathematically by dividing the amount the investor stands to lose by the amount of profit the investor expects to make once the trade is closed.

Nisbat As Seer Ila Ar Ribh

English: Price-to-earnings ratio

Definition: A ratio for valuing a company that measures its current share price relative to its per-share earnings.

Non Performing Financings (NPF’s)

The Islamic banking equivalent to non-performing-loans. NPF’s are based on a profit sharing basis and not interest as are their conventional counterparts



English: discount

Definition: Qabdh means possession, which refers to a contract of exchange. Generally, qabdh depends on the perception of ‘urf or the common practices of the local community in recognizing that the possession of a good has taken place.


English: acceptance in a contract

Definition: Also see Ijab


English: loan

Qard Hasan

English: benevolent loan
Alternate spelling: Qard Hassan, Qard al Hassan

Definition: A loan contract between two parties for social welfare or for short-term bridging finance. Repayment is for the same amount as the amount borrowed. The borrower can pay more than the amount borrowed so long as it is not stated by contract.

Most Islamic banks provide interest-free loans to customers who are in need. The Islamic view of loans (qard) is that there is a moral duty to give them to borrowers free of charge, as a person seeks a loan only if he is in need of it. Some Islamic banks give interest-free loans only to the holders of investment accounts with them; some extend them to all bank clients; some restrict them to needy students and other economically weaker sections of society; and some provide interest-free loans to small producers, farmers and entrepreneurs who cannot get finance from other sources.

Qard Marhali

English: Bridge loan

Definition: A type of short-term financing typically taken out pending the arrangement of a longer-term facility. See Tamweel Marhali.

Qawaid Fiqhiyah

English: Legal maxims

Definition: These are juristic legal maxims, some taken from the Hadith.


English: gambling

Definition: An agreement in which possession of a property is dependant 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 a gain for the other, without specifying which party will gain and which party will lose.


English: Non-fungibles

Definition: Something that is not easy to exchange directly with other goods or assets.


English: Synonym for Mudarabah


English: Sector

Definition: An industry or market subdivision within an economic system.


English: analogical deduction

Definition: Derivation of the law on the analogy of an existing law if the basis or Illah of both is the same.


English: the holy scriptures of Islam

Qurud Ghayr Madmuna Bil Usul

English: Unsecured loans

Definition: A loan issued without collateral and supported by the reputation and high credit rating of the borrower.

Qurud Mutaathera

English: Non-performing loans

Definition: A loan that is in default or near to being in default. Most loans become non-performing after being in default for 90 days.


Rab al maal

English: the investor in a Mudarabah contract
Alternate spelling: Rab al mal


English: collateral

Definition: An arrangement whereby a valuable asset is placed as collateral for a debt. The collateral may be disposed of in the event of a default.

Ra’s al-mal

English: capital

Definition: The money or property that the Rab al maal invests in a profit-seeking venture, often in a partnership such as a Mudarabah or Shirkah.


English: interest

Definition: An increase, addition, unjust return, or advantage obtained by the lender as a condition of a loan. Any risk-free or “guaranteed” rate of return on a loan or investment is riba. Riba in all its forms is prohibited in Islam.

In conventional terms, riba and “interest” are used interchangeably, although the legal notion extends beyond mere interest.

Riba Ad Dayn

English: Debt interest

Definition: Interest earning by lending money to or borrowing from another party, thus appearing in debt (Dayn) as a percentage added to the principal. Impermissible.

Riba al Buyu

English: usury of trade

Definition: Also known as riba al fadl.

A sale transaction in which a commodity is exchanged for an unequal amount of the same commodity and delivery is delayed.

To avoid riba al buyu, the exchange of commodities from both sides must be equal and instant. Riba al buyu was prohibited by the prophet Mohammad to forestall riba (interest) from creeping into the economy.

Riba al Diyun

English: usury of debt

Definition: Also known as usury of delay (riba al nasia).

The usury of debt was an established practice amongst Arabs during the pre-Islamic period. It can occur as an excess increment on top of the principal, which is incorporated as an obligatory condition of the giving of a loan.

Alternatively, an excess amount is imposed on top of the principal if the borrower fails to repay on the due date. More time is permitted for repayment in return for an additional amount. If the borrower fails to pay again, a further excess amount is imposed, etc.


English: goods subject to fiqh rules on riba


English: bribery


English: pillar
Alternate spelling: Arkan

Definition: An integral part of an act, such as a transaction, without which the act cannot be said to have been performed.


English: payment order Definition: A payment order to draw money from the bank; used in the early Muslim period.



English: Dry measure

Definition: A dry measure used during the time of the Prophet (pbuh).


English: voluntary charitable giving
Alternate spelling: Sadaqat

Sadd Dharai

English: Blocking the means'

Definition: Literally means 'closing off the means that can lead to evil' and is interpreted as a maxim to prohibit transactions where the means are lawful but the end result is unlawful or impermissible. For example, selling grapes to someone you know will use them to make wine.

Safi Al Arbah Al Aida Ila Al Musahimin

English: Net income

Definition: Total comprehensive income, known as net earnings or net profit. A company's total income minus the cost of goods sold, expenses and taxes for an accounting period.

Safi Aqsat Al Tamin Al Muktataba

English: Net written premiums

Definition: The total sum of premiums written by an insurance company minus any premiums given to reinsurance companies, plus any reinsurance assumed. Net premiums represent how much the company gets to keep for assuming risk.


English: sound, correct

Definition: Opposite of Batil. Hadith of the highest level of authentication.

Sahm Al Sila’ Al Mutadawala

English: Exchange traded commodity

Definition: A fund or investment vehicle tracking the performance of an underlying commodity and traded on an exchange.


English: loan for short, intermediate or long term

Definition: Also a synonym for Salam. Unlike Qard, however, the amount given as Salaf cannot be called back before it is due.


English: Ritual Muslim prayer

Definition: One of the five pillars of the faith of Islam.


English: advance purchase
Alternate spelling: Al Salam, Bai al Salam, Bai Salam

Definition: Advance payment for goods which are to be delivered at a specified future date. Under normal circumstances, a sale cannot be effected unless the goods are in existence at the time of the bargain. However, this type of sale is an exception, provided the goods are defined and the date of delivery is fixed. The objects of sale must be tangible goods that can be defined as to quantity, quality and workmanship.

This mode of financing is often applied in the agricultural sector, where the bank advances money for various inputs to receive a share in the crop, which it then sells.


English: Shariah compliant property mortgage in the USA


English: Bonds

Definition: A debt security, under which the issuer owes the bondholder a debt.


English: Fund

Definition: A sum of money set aside for a variety of reasons - such as a transaction, project, person, business, or investment. Can also be away from investing money alongside other investors in order to benefit from working as a group or from the expertise of a manager.

Sanduq Istithmar Maftuh

English: Open-ended fund

Definition: A collective investment scheme that continues to issue shares no matter how many investors it accumulates.

Sanduq Mutadawal Fi Al Bursa

English: Exchange traded fund

Definition: An investment fund traded on a stock exchange.


English: currency sale

Definition: Refers to buying and selling of currencies.

Seer As Souq

English: Market price

Definition: The economic price for which something is offered in the free marketplace.

Seer At Taswiya

English: Matching rate

Definition: A matching rate in Mudarabah contracts, which must be paid to the Mudarib if the contract fails.

Seer Bai Ar Rasmi

English: Official selling price

Definition: The agreed price at which an item can be sold.


English: Islamic school of law Definition: Islamic school of law founded by Abu Abdullah Ahmad bin Idris or Imam Shafie. Followers of this school are known as Shafi'es.


English: Testimony

Definition: The first of the five pillars of Islam: declaring belief in the oneness of God and the acceptance of Muhammad as God's prophet.


English: Islamic jurisprudence
Alternate spelling: Sharia, Shari'a, Shari'ah, Syariah, Syaria, Syari'ah, Syari'a

Definition: Islamic cannon law derived from three sources: the Quran, the Hadith and the Sunnah

A “Shariah compliant” product meets the requirements of Islamic law.

A “Shariah board” is the committee of Islamic scholars available to an Islamic financial institution for guidance and supervision in the development of Shariah compliant products.

A “Shariah advisor is an independent Islamic trained scholar that advises Islamic institutions on the compliance of the products and services with the Islamic law.

Sharika Mutasawiya

English: Equal partnership

Definition: An unrestricted, unlimited and equal partnership.

Sharikah Amal

English: Work partnership

Definition: A partnership where two or more parties work together for the purpose of creating and sharing profit through pooling their labor but without contributing capital investment. 

Sharikah Amwal

English: Partnership by capital contribution

Definition: A partnership in which participation is based on the contribution of wealth by all partners (as opposed to the ownership of assets).

Sharikah Aqd

English: Contractual partnership

Definition: A type of partnership formed by means of mutual agreement between two or more parties who agree that each will contribute to the capital of the business and is entitled to a corresponding share in its profit or loss.

Sharikah Inan

English: Unequal partnership

Definition: A basic agency contract of partnership which has unequal contributions or legal capacity, on the basis of either wealth or labor.

Sharikah Mulk

English: Partnership by asset ownership

Definition: A type of partnership involving joint ownership (Mulk) by two or more persons in a particular property solely for the sake of ownership instead of for a contractual agreement. Usually created through a situation such as inheritance where two or more parties come to hold an asset in common. Ownership gives each party the right to share in the returns of the underlying property or asset.

Sharikah Wujooh

English: Partnership by creditworthiness

Definition: The definition of a partnership where each party contributes their own reputation to purchase assets (on a deferred payment basis) in order to sell them on credit and make a profit which is shared between the parties.

Sharikat Istithmar Mubashir

English: Private equity firm

Definition: An investment manager active in the acquisition of the private equity of companies through a variety of investment strategies including leveraged buyouts, venture capital, and growth capital.

Sharikat Shibih Hukumiya

English: Parastatal

Definition: State entities set up to undertake commercial activities on behalf of the government or public agencies.


English: stipulation in a contract
Alternate spelling: Shurut

Definition: Pre-existing condition for a transaction to be valid

Shart Jazaa

English: Penalty clause

Definition: A clause in a contract that requires a penalty to be paid under specified terms (as in the event of a breach) - usually unenforceable.


English: partnership

Definition: A contract between two or more persons who launch a business or financial enterprise to make a profit.


English: right of pre-emption Definition: The right of pre-emption in sale transactions, for example, a real estate sale in which one party has the right to compel the vendor to sell all or part of the real estate in the event of a sale.


English: formal exchange

Definition: Parties’ willingness to enter into the contractual agreement, which therefore constitutes the contract itself.


English: bill of exchange
Alternate spelling: Suftaja, Suftajal

Definition: A bill of exchange between three parties (the payor, the payee and the transmitter), which was used for the delegation of credit during the Muslim period, especially the Abbasides period. It was used to collect taxes, disburse government dues, transfer funds by merchants and was commonly used by traveling merchants. Suftajahs could be payable on a future fixed date or immediately.

It differs from the modern bill of exchange in that a sum of money transferred by suftajah had to keep its identity and payment had to be made in the same currency. Also it 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). Finally, a suftajah could be endorsed. The Arabs had been using endorsements (hawala) since the days of the Prophet Muhammad.


English: Islamic bond (Plural. Also see Saak.)

Definition: An asset-backed bond which is structured in accordance with Shariah and may be traded in the market.

A Sukuk represents proportionate beneficial ownership in the underlying asset, which will be leased to the client to yield the return on the Sukuk.


English: practice and traditions of the Prophet Muhammad



English: Collaborationn

Definition: Working together - contribution, cooperation.

Tabadul Muadalat Ar Ribh

English: Profit rate swap

Definition: The combination of either two legs of a Murabahah contract or of multiple Murabahah undertakings in order to replicate an interest rate swap for risk management/cost reduction purposes.

Tabadul Wadai

English: Exchange of deposits

Definition: An Islamic finance treasury arrangement whereby two parties place alternative currency deposits with each other for an agreed period - either to satisfy liquidity requirements in a particular currency or to manage excess liquidity.

Tabadul Wadai

English: Exchange of deposits

Definition: An Islamic finance treasury arrangement whereby two parties place alternative currency deposits with each other for an agreed period - either to satisfy liquidity requirements in a particular currency or to manage excess liquidity.


English: Takaful donation Definition: A contract where a participant agrees to donate a pre-determined percentage of his contribution (to a Takaful fund) to provide assistance to fellow participants. In this way he fills his obligation of joint guarantee and mutual help should another participant suffer a loss. This concept eliminates the element of gharar from the Takaful contract.


English: Extravagance

Definition: Spending wealth in incorrect ways, squandering money or possessions instead of using it for the benefit of the individual and society. 


English: wasteful spending

Definition: Especially on objects explicitly prohibited by the Shariah, irrespective of the quantum of expenditure. (Also see Israf)

Tadlis al’ aib

English: intentionally hiding the defects of goods

Definition: Refers to the activity of a seller intentionally hiding the defects of goods. This activity is prohibited according to the Shariah principles.

Taftit Mulkiyat Musahimin

English: Share diluiton

Definition: The issuance of additional stock by a company.

Taghitya Aajila

English: Forward cover

Definition: A forward exchange contract between a bank and a customer, whereby a rate of exchange is fixed immediately, for the buying and selling of one currency for another, for delivery at an agreed future date.

Tahwilat Mughtaribin

English: Remittances

Definition: A sum of money sent as payment or gift - usually referring to the transfer by foreign workers of a portion of their income back to their home countries. 


English: Islamic insurance

Definition: Based on the principle of mutual assistance, Takaful provides mutual protection of assets and property and offers joint risk-sharing in the event of a loss by one of the participants. 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, such as gharar and riba.


English: Financing

Definition: The provision of funds for business activities.

Tamweel Marhali

English: Bridge financing

Definition: A type of short-term financing typically taken out pending the arrangement of a longer-term facility.


English: manipulation

Definition: Refers to a conspiracy between a seller and a buyer wherein the buyer is willing to purchase the goods at a higher price. This is done so that others would rush to buy the goods at a higher price, resulting in the seller obtaining a huge profit. This transaction is not permissible in Islam.


English: Profit calculation period

Definition: The period in Mudarabah during which profit can be calculated

Taqsim Umala’ Ila Sharaeh Hasb Istihlak

English: Segmentation

Definition: Dividing a target market into subsets that have common needs, interests, and priorities, and then designing and implementing strategies to target them.

Tasjeel Iradat

English: Revenue recognition

Definition: The transactions which a firm deems appropriate to form part of its revenue-generating sales.

Tasnif Quwa Maliya

English: Financial strength rating

Definition: Rating of a company in terms of its financial strength, usually by a recognized agency.

Taswiyat Marakiz

English: Window dressing

Definition: A strategy sometimes employed by fund managers to improve the appearance of a fund's performance before presenting it to investors.


English: reverse Murabahah

Definition: In personal financing, a client with a genuine need buys an item 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 client can obtain cash without taking out an interest-based loan. It has two forms: Tawarruq Munazzam (organized Tawarruq), in which the client simply seeks credit and has no interest in the original asset for sale; and Tawarruq al Asli, where the client buys goods on credit and then sells them to get cash.


English: Sale of cost

Definition: Full disclosure sale where the price is the same as the original price. A Tawlia sale is a commodity sold without a mark-up or a discount - a profitless sale. 


English: deliberate delay in payment

Definition: Penalty agreed upon by the contracting parties as compensation that can rightfully be claimed by the creditor when the debtor fails or is late in meeting his obligation to pay back the debt.


Engolish: Price

Definition:Payment or compensation given in return for goods or services.



English: fee

Definition: The financial charge for using services, or manfaat (wages, allowance, commission, etc).


English: Muslim scholars

Definition: A Shariah scholar or authority.


English: the Muslim community

Umum balwa

English: Common plight Definition: An unfavorable widespread situation affecting most people which is difficult to avoid.

Uqud al-Isytirak

English: Contracts of partnership

Uqud al-Mu’awadhart

English: Contracts of exchange

Uqud al-Tabarruat

English: Charitable contracts


English: deposit

Definition: Earnest money which forms part payment of the price of goods or services paid in advance, but will be forfeited in the event the transaction is cancelled. The forfeited money is considered as hibah (gift).

Usul Aliya Mukhatir

English: Toxic assets

Definition: Financial assets which have lost the majority of their value and/or for which there is no longer a functioning market or demand so they cannot be sold at a satisfactory price reflective of their original value.

Usul Fiqh

English: Theorectical jurisprudence

Definition: Principles of Islamic jurisprudence - the study and critical analysis of the origins, sources and principles of Islamic law. 



English: Unilateral undertaking

Definition: A binding obligation issued by a counterparty (such as a potential purchaser) in Murabahah transactions, where the promisor undertakes to proceed with the contract. 


English: Deposit
Alternate spelling: Wadia, Al Wadia, Al Wadiah

Definition: The safekeeping of goods with a deposit on the original stated cost. An Islamic bank acts as the keeper and trustee of depositors' funds. It guarantees to return the entire deposit, or any part of it, on the depositor's demand.

Wadiah Yad Dhamanah

English: Savings or deposits with guarantee

Definition: Goods or deposits entrusted to the care of a person, who is not the owner, for safekeeping. The depository becomes the guarantor, thereby guaranteeing repayment of the whole amount or any part of the deposits that is outstanding in the account of depositors, when so demanded. The depositors are not entitled to any share in the profits but the depository may provide returns to the depositors as a token of appreciation.


English: agency
Alternate spelling: Wakala, Al Wakala, Al Wakalah

Definition: Absolute power of attorney: where a representative is appointed to undertake transactions on another person's behalf.

In terms of Takaful operations, Wakalah refers to an agency contract, which may involve a fee for the agent.

Wakalah Istithmar

English: Investment agency

Definition: A method whereby Islamic financial institutions manage funds on behalf of clients through the provision of agency (Wakalah) services in return for specific fund management fees, which are pre-agreed and do not vary based on profit and loss from the relevant funds. The fees can be fixed or a percentage of invested assets. 


English: charitable trust
Alternate spelling: Awkaf, Awqaf

Definition: An endowment or a charitable trust set up for Islamic purposes (usually for education, mosques, or for the poor). It involves tying up a property in perpetuity so that it cannot be sold, inherited, or donated to anyone.


English: will or testament

Definition: Document detailing the manner in which a Muslim’s wealth is to be disposed of after his death.


Yadan Bi Yad

English: Hand to hand

Definition: Spot settlement in Ribawi transactions.



English: religious tax
Alternate spelling: Zakah

Definition: An obligatory contribution which every wealthy Muslim is required to pay to the Islamic state, or to distribute amongst the poor.

According to Islam, zakat – the third pillar of Islam – purifies wealth and souls. Zakat is levied on cash, cattle, agricultural produce, minerals, capital invested in industry and business.

There are two types of zakat:
Zakat al Fitr, which is payable by every Muslim able to pay at the end of Ramadan. 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.