Amanah: It refers to deposits in trust. A person can hold a property in trust for another, sometimes by express contract and sometimes by implication of a contract. Amanah entails absence of liability for loss except in breach of duty. Current Accounts are regarded as Amanah (trust). If the bank gets authority to use Current Accounts funds in his business,
Amanah transforms into a loan. As every loan has to be repaid, banks are liable to repay full amount of the Current Accounts.
Arbun: Down payment; a nonrefundable deposit paid by a buyer retaining a right to confirm or cancel the sale.
Al-‘Aariyah (Gratuitous loan of non-fungible objects) Al-‘Aariyah means loan of a particular piece of property, the substance of which is not consumed by its use, without anything taken in exchange, In other words, it is the gift of usufruct of a property or commodity that is not
consumed on use. It is different from Qard that is the loan of fungible objects which are consumed on use and in which the similar and not the same commodity has to be returned. It is also a virtuous act like Qard. The borrowed commodity is treated as liability of the borrower who is bound to return it to its owner.
Bai‘ Muajjal: Literally it means a credit sale. Technically, a financing technique adopted by Islamic banks that takes the form of Murabaha Muajjal. It is a contract in which the seller earns a profit margin on his purchase price and allows the buyer to pay the price of the commodity at a future date in a lump sum or in installments. He has to expressly mention cost of the commodity and the margin of profit is mutually agreed. 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' Salam: Salam means a contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract. According to normal rules of the Shariah, no sale can be effected unless the goods are in existence at the
time of the bargain, but Salam sale forms an exception given by the Holy Prophet (SAW) himself to the general rule provided the goods are defined and the date of delivery is fixed. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. The objects of this sale are goods and cannot be gold, silver or currencies because these are regarded as monetary values exchange of which is covered under rules of Bai al Sarf, i.e. mutual exchange is hand to hand without delay. Barring this, Bai'Salam covers almost everything which is capable of being definitely described as to quantity, quality and workmanship.
Bai bil Wafa:
'' Sale with a right in the seller, having the'' effect of a condition, to repurchase (redeem) the property by refunding the purchase price. According to majority of Fuqaha it is not permissible.
Daman:
1) Contract of guarantee, security or collateral; (2) Responsibility of entrepreneur/manager of a business; one of two basic relationships toward property, entailing bearing the risk of its loss; compare Amanah.
Dayn or Debt:
A Dayn comes into existence as a result of any other contract or credit transaction. It is incurred either by way of rent or sale or purchase or in any other way which leaves it as a debt to another. Duyun (debts) ought to be returned without any profit since they are advanced to help the needy and meet their demands and, therefore, the lender should not impose on the borrower more than what he had given on credit.
Falah:
Falah means to thrive, to become happy or to have luck and success. Technically it implies success both in this world and in the Akhirah (Hereafter). The Falah presumes belief in one God, the apostlehood of Prophet Muhammad (Peace be upon him), Akhirah and conformity to the Shariah in behaviour.
Fiqh:
Islamic law. The science of the Shariah. It is an important source of Islamic economics. It means any element of absolute or excessive uncertainty
Gharar:
in any business or a contract about the subject of contract or its price, or mere speculative risk. It leads to undue loss to a party and unjustified enrichment of other, which is prohibited. This provides the rationale and
Al Ghunm bil Ghurm:
the principle of profit sharing in Shirkah arrangements. Earning profit is legitimized only by engaging in an economic venture, risk sharing and thereby contributing to the economy.
Halal:
Anything permitted by the Shariah.
Haram:
Anything prohibited by the Shariah.
Hawalah:
Literally, it means transfer; legally, it is an agreement by which a debtor is freed from a debt by another becoming responsible for it, or the transfer of a claim of a debt by shifting the responsibility from one person to another – contract of assignment of debt. It also refers to the document by which the transfer takes place.
Hibah:
Hibah means Gift.
Ijab:
Offer, in a contract; see also qabul.
Ijarah:
Letting on lease. Sale of a definite usufruct of any asset in exchange of definite reward. It refers to a contract of land leased at a fixed rent payable in cash and also to a mode of financing adopted by Islamic banks. It is an arrangement under which the Islamic banks lease equipments, buildings or other facilities to a client, against an agreed rental.
Ijarah-wal-Iqtina‘:
A mode of financing, by way of Hire-purchase, adopted by Islamic banks. It is a contract under which the Islamic bank finances equipment, building or other facilities for the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. The undertaking or the promise does not become an integral part of the lease contract to make it conditional. The rental as well as the purchase price are fixed in such a manner that the bank gets back its principal sum alongwith with some profit, which is usually determined in advance.
Ijtihad:
It refers to an endeavor of a qualified jurist to derive or formulate a rule of law to determine the true ruling of the divine law in a matter on which the revelation is not explicit or certain, on the basis of Nass or evidence found in the Holy Qur’an and the Sunnah. Express injunctions
have no room for Ijtihad. Implied injunctions can be interpreted in different ways by way of inference from the accepted principles of the Shariah.
‘Illah:
It is the attribute of an event that entails a particular Divine ruling in all cases possessing that attribute. ‘Illah is the basis for applying analogy for determining permissibility or otherwise of any act or transaction.
Ijma‘:
Consensus of all or majority of the leading qualified jurists on a certain Shariah matter in a certain age.
‘Inah ( A kind of Bai):
Double sale by which the borrower and the lender sell and then resell an object between them, once for cash and once for a higher price on credit, with the net result of a loan with interest.
‘Inan (A type of Shrikah):
It is a form of partnership in which each partner contributes capital and has a right to work for the business, not necessarily equally.
Istihsan:
It is a doctrine of Islamic law that allows exception to strict legal reasoning, or guiding choice among possible legal outcomes, when considerations of human welfare so demand.
Israf:
It refers to immoderateness, exaggeration and waste and covers spending on lawful objects but exceeding moderation in quantity or quality; spending on superfluous objects while necessities are unmet; spending on objects which are incompatible with the economic standard of the majority of the population. See also Tabzir
Istisna’a:
It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. A manufacturer or builder agrees to produce or build a well described good or building at a given price on a given date in the future. Price can be paid in installments, step by step as agreed between the parties. Istisna’a can be used for providing the facility of financing the manufacture or construction of houses, plants, projects, and building of bridges, roads and highways.
Jahl or Jahala:
Ignorance, lack of knowledge; indefiniteness in a contract, sometime leading to Gharar.
Jua alah or Ji’alah:
Literally, Joalah constitutes wages, pay, stipend or reward. Legally, it is a contract for performing a given task against a prescribed fee in a given period. A similar contract is ‘Ujrah’ in which any work is done against stipulated wage or fee.
Kali bil-Kali: The term Kali refers to something delayed; appears in a maxim forbidding the sale of al-Kali bil-Kali i.e. the exchange of a delayed counter value for another delayed counter value.
Al- Kafalah (Suretyship):
Literally, Kafalah means responsibility, amenability or suretyship, Legally in Kafalah a third party become surety for the payment of debt. It is a pledge given to a creditor that the debtor will pay the debt, fine etc. Suretyship in Islamic law is the creation of an additional liability with regard to the claim, not to the debt or the assumption only of a liability and not of the debt.
Kharaj bi-al-Daman ( ): Gain accompanies
liability for loss; a Hadith forming a legal maxim and a basic principle – see
also Al- Ghunm bil Ghurm.
4
Option or a power to annul or cancel a contract.
):
Khiyar (
Option of the contracting session;
Khiyar al-Majlis ( ):
the power to annul a contract possessed by both contracting parties as long
as they do not separate.
Khiyar al-Shart ( ): A right, stipulated by one or both of the
parties to a contract, to cancel the contract for any reason for a fixed period
of time.
Mal-e-Mutaqawam ( ): Things the use of which is lawful
under the Shariah; or wealth that has a commercial value. Legal tenders of
modern age that carry monetary value are included in Mal-e-Mutaqawam. It
is possible that certain wealth has no commercial value for Muslims (non
Mutaqawam) but is valuable for non-Muslims. Examples are wine and pork.
Maisir ( ): An ancient Arabian game of chance played with
arrows without heads and feathering, for stakes of slaughtered and quartered
camels. It came to be identified with all types of hazard and gambling.
Goods that can be returned in kind,
Mithli (Fungible goods) ( ):
i.e. gold for gold, silver for silver, US $ for US $, wheat for wheat, etc.
Object that is lawful (i.e. something which is permissible
Mubah ( ):
to use or trade in).
A form of partnership where one party provides
Mudarabah ( ):
the funds while the other provides expertise and management. The latter is
referred to as the Mudarib. Any profits accrued are shared between the two
parties on a pre-agreed basis, while loss is borne by the provider(s) of the
capital.
Literally it means a sale on mutually agreed profit.
Murabaha ( ):
Technically, it is a contract of sale in which the seller declares his cost and
the profit. This has been adopted by Islamic banks as a mode of financing.
As a financing technique, it can involve 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 stipulated in advance.
Musawamah ( ): Musawamah is a general kind of sale in which
price of the commodity to be traded is bargained between seller and the
purchaser without any reference to the price paid or cost incurred by the
former.
Musharakah ( ): Musharakah means a relationship established
under a contract by the mutual consent of the parties for sharing of profits
and losses in the joint business. It is an agreement under which the Islamic
bank provides funds which are mixed with the funds of the business
5
enterprise and others. All providers of capital are entitled to participate in
management, but not necessarily required to do so. The profit is distributed
among the partners in pre-agreed ratios, while the loss is borne by every
partner strictly in proportion to respective capital contributions.
Acceptance, in a contract; see also Ijab.
Qabul ( ):
Qard (Loan of fungible objects) ( ): The literal meaning of Qard
is ‘to cut’. It is so called because the property is really cut off when it is
given to the borrower. Legally, Qard means to give anything having value in
the ownership of the other by way of virtue so that the latter could avail of
the same for his benefit with the condition that same or similar amount of
that thing would be paid back on demand or at the settled time. It is that
loan which a person gives to another as a help, charity or advance for a
certain time. The repayment of loan is obligatory. The Holy Prophet is
reported to have said “…..Every loan must be paid……”. But if a debtor is
in difficulty, the creditor is expected to extend time or even to voluntarily
remit the whole or a part of the principal. Qard is, in fact, a particular kind
of Salaf. Loans under Islamic law can be classified into Salaf and Qard, the
former being loan for fixed time and the latter payable on demand. (see
Salaf)
Qimar means gambling. Technically, it is an
Qimar ( ):
arrangement in which possession of a property is contingent upon the
happening of an uncertain event. By implication it applies to a situation in
which there is a loss for one party and a gain for the other without specifying
which party will lose and which will gain.
Qiyas ( ): Literally it means measure, example, comparison or
analogy. Technically, it means a derivation of the law on the analogy of an
existing law if the basis (‘illah) of the two is the same. It is one of the
sources of Islamic law.
An excess or increase. Technically, it means an increase over
Riba ( ):
principal in a loan transaction or in exchange for a commodity accrued to the
owner (lender) without giving an equivalent counter-value or recompense
(‘iwad) in return to the other party; every increase which is without an ‘iwad
or equal counter-value.
Riba Al-Fadl ( ): Riba Al-Fadl (excess) is the quality
premium in exchange of low quality with better quality goods e.g. dates for
dates, wheat for wheat, etc. – an excess in the exchange of Ribawi goods
within a single genus. The Concept of Riba Al-Fadl refers to sale
transactions while Riba Al-Nasiah refers to loan transactions.
Riba Al-Nasiah ( ): Riba Al-Nasiah or riba of delay is due
to exchange not being immediate with or without excess in one of the
counter values. It is an increment on principal of a loan or debt payable. It
6
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 the
period the amount originally lent together with an increase on it, in
consideration of the lender having granted him time to pay. Interest, in all
modern banking transactions, falls under purview of Riba Al-Nasiah. As
money in present banking system is exchanged for money with excess and
delay, it falls, under the definition of riba. A general accord reached among
scholar about its prohibition.
Goods subject to Fiqh rules on Riba in sales, variously
Ribawi ( ):
defined by the schools of Islamic Law: items sold by weight and by measure,
foods, etc.
Pledge, Collateral; legally, Rahn means to pledge or
Al- Rahn ( ):
lodge a real or corporeal property of material value, in accordance with the
law, as security, for a debt or pecuniary obligation so as to make it possible
for the creditor to recover the debt or some portion of the goods or property.
In the pre-Islamic contracts, Rahn implied a type of earnest money which
was lodged as a guarantee and material evidence or proof of a contract,
especially when there was no scribe available to put it into writing. The
institution of earnest money was not accepted in Islamic law and the
common Islamic doctrine recognized Rahn only as a security for the
payment of a debt.
Salaf or Loan / Debt ( )
The word Salaf literally means a loan which draws forth no profit for
the creditor. In wider sense, it includes loans for specified periods, i.e.
short, intermediate and long-term loans. Salaf is another name of
Salam as well wherein price of the commodity is paid in advance
while the commodity or the counter value is supplied in future; thus
the contract creates a liability for the seller. Amount given as Salaf
cannot be called back, unlike Qard, before it is due. (see Qard)
Al-Sarf ( ): Basically, in pre-Islamic times it was exchange of
gold for gold, silver for silver and gold for silver or vice versa. In Islamic
law such exchange is regarded as ‘sale of price for price’ (Bai al Thaman bil
Thaman), and each price is consideration of the other. It also means sale of
monetary value for monetary value – currency exchange.
Shariah ( ): The term Shariah refers to divine guidance as given
by the Holy Qur’an and the Sunnah of the Prophet Muhammad (PBUH) and
embodies all aspects of the Islamic faith, including beliefs and practice.
A contract between two or more persons who launch a
Shirkah ( ):
business or financial enterprise to make profits. In the conventional books of
7
Fiqh, the partnership business has been discussed under the option of
Shirkah that, broadly, may include both Musharakah and Mudarabah.
Custom, habit or way of life. Technically, it refers to
Sunnah ( ):
the utterances of the Prophet Muhammad (PBUH) other than the Holy Quran
known as Hadith, or his personal acts, or sayings of others, tacitly approved
by the Prophet.
It is a donation/gift the purpose of which is nit
Tabarru’ ( ):
commercial but is seeking the pleasure of Allah. Any benefit that is given by
a person to other without getting anything in exchange is called Tabarru’.
Gracious repayment of debt, absolutely at lender’s own discretion and
without any prior condition or inducement for reward, is also covered under
Tabarru’. Repaying a loan in excess of principal and without a pre-condition
is commendable and compatible with the Sunnah of the Holy Prophet (peace
be upon him). But, it is matter of individual discretion and cannot be
adopted as a system because this would mean that loan would necessarily
yield a profit. If such reward takes the form of a system, it would be
considered Riba.
Tabzir ( ): Spending wastefully on objects which have been
explicitly prohibited by the Shariah irrespective of the quantum of
expenditure. See also Israf.
'
Ujrah ( ): See Juaalah.
A contract of agency in which one person appoints
Wakalah ( ):
someone else to perform a certain task on his behalf, usually against a
certain fee.
