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Glossary Of Common Arabic Terms Used In Islamic Finance
   
 

Glossary of Common Arabic Terms Used In Islamic Finance.

         
 
Adl
  Justice, fairness.
   
Ahadith
  (plural of Hadith) Sayings of the Prophet Muhammad (peace be upon him).
   
Ayah
  Verse of the Holy Quran
   
Bay
  Sale Often used as a prefix. Referring to different types of sale.
   
Bay al-dayn
  Sale of debt. Debt usually cannot be sold except for face value.
   
Bay al-salam
  A sale where payment is made in advance by the buyer, and delivery of goods is deferred by the seller.
   
Bay al-salaf
  Alternate term for Bay al-salam.
   
Bay al mu ajjal
  Credit sale. (Bay bi thaman also referred to as a credit sale).
   
Bay al-mudaf
  A sales contract in which delivery of both commodity and payment is deferred (Usually not permitted in Shariah).
   
Fard
  Obligatory duty.
   
Fatwa
  Religious verdict.
   
Fiqh
  Verdict within Islamic jurisprudence. Based on the Quran and the Sunnah.
   
Gharar
  Uncertainty.
   
Hadith
  Sayings and deeds of the prophet Muhammad (Peace be upon him).
   
Halal
  Activities permitted under the Shariah.
   
Haram
  Activities that are not permitted, such as the drinking of Alcohol, or the cutting down of trees for monetary gain, backbiting.
   
Hukm
  Shariah ruling.
   
Ijarah
  Leasing. Sale usufruct of an asset.
   
Ijma
  Consensus by the Islamic scholars.
   
Ijtihad
  Ruling by a jurist based from Quran and teachings of the Prophet Muhammad (Peace be upon him). According to the great Jurist Shafi generally you need to know 500 verses of the Quran referring to the aspect you intend to rule upon.
   
Istihsan
  Departure from one ruling to another ruling to bring about ease.
   
Istislah
  Judgement not supported by the Quran and Sunnah, driven by broader public interest.
   
Istisna
  Refers to a contract where the seller agrees to sell at and deliver at a certain price on a given date in the future. Unlike a Salam sale the payment can be made at an agreed future time.
   
Khayar al-shart
  Option to rescind a sales contract based on some conditions.
   
Mu amalat
  Relationships/contracts/transactions amongst human beings.
   
Mudarabah
  Contract between two parties. Profit is distributed amongst the parties in accordance to the ratio that has been agreed at the time of the contract. Financial loss is Bourne only by the financer. The entrepreneurs’ loss lies in not getting any reward for his or her services.
   
Murabahah
  Sale at a specified profit margin. The term is however now used to refer to sales agreements where the seller purchases goods desired by the buyer and sells them at an agreed marked-up price, the payment being settled within a agreed time frame. Either by instalments or by lump sum. Sellers bear the risks till delivery is taken. Also called bau-ul mu ajjal.
   
Musharakah
  Partnership. Similar to a Mudarabah, the difference being in the former both parties participate in the management and the provision of capital, and share in the profit and loss. Profits are distributed with the ratios initially set. But loss is distributed to each ones share in the capital.
   
Qarad Hasan
  Loan extended without Interest.
   
Quran
  Revelation from God to the prophet Muhammad (Peace be upon him) the basis of guidance to the Islamic faith.
   
Rabb al-mal
  Financier in a Mudarabah contract.
   
Riba
  Interest, Usury all interest bearing transactions’ are strictly forbidden to Muslims according to the Quran see Surah (2:275). The prophet Muhammad (peace be upon him) has voiced Riba as one of seven major sins.
   
Riba al-fadl
  Riba pertaining to trade contracts.
   
Riba al-Nasa
  Riba pertaining to loan contracts.
   
Surah
  Chapter in Quran.
   
Sunnah
  The second most important source in the Islamic faith. It refers to the actions and conduct of the prophet Muhammad (peace be upon him) The only way to the sunnah is through authenticated hadith, which consists of reports about the sayings, actions and endorsements of the prophet (peace be upon him).
   
Shariah
  Islamic Law.
   
Takaful
  Mutual Insurance.
   
Wakalah
  Contract of agency. In this contract, one person appoints someone else to perform a certain task on there behalf. Usually against a fixed fee.
   
Wadi ah
  A contract where valuables are left with someone else. The keeper is permitted to charge a fee even though historically the Islamic culture encourages providing the service free of charge.
   
Sukuk
  Islamic investment certificate. An asset backed security.
   
Zakah
 

An obligatory amount payable by all Muslims mainly for the benefit of the poor and needy. 

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