A to Z

  • A glossary of Islamic finance terms


    A payment or compensation. For example, a commission, fee or wage charged for a service

    Al Sar Al Adl

    The just and fair price

    Al Wakala Al Mutlaqa

    Absolute power of attorney


    Reliability, trustworthiness and honesty


    A worker, or an agent, who performs a task deserving compensation


    Wealth. Worldly possessions, including property and money.


    A contract or agreement

    Aqd Al Bay

    A contract of sale

    Aqd Al Muawadah

    A contract of exchange where compensation is given against the goods or services received

    AqdGhair Lazim

    A contract in which all parties have the right to revoke, with the consent of the others

    Aqd Lazim

    A contract in which none of the parties have the right to revoke, without the consent of the others


    A non-refundable down payment or deposit, paid by a buyer for the right to purchase goods at a certain time and certain price in future. If the right is exercised, it becomes part of the purchase price. If the buyer does not complete the purchase or backs out for any reason, the seller has the option to forfeit the deposit.


    Tangible assets, such as monetary wealth


    A 'sale' or 'contract of sale'

    Bai Bithaman Ajil

    The sale of goods on a deferred payment basis

    Bai Mu’ajjal

    A credit sale or deferred payment contract

    Bai Wafa

    A buy-back, sale and repurchase

    Bay'al Ayan

    The sale of tangible assets, as opposed to sale of services or rights


    Invalid sale or contract

  • A glossary of Islamic finance terms


    A guarantee

    Diminishing Musharaka

    Diminishing partnership. One party reduces its equity in an asset with any additional capital payment the other party makes.

    Fiqh A Mua'malat

    Jurisprudence of financial transactions, or the rules of transacting in a Sharia compliant manner

  • A glossary of Islamic finance terms


    The element of absolute or excessive uncertainty in any business or contract


    A debtor who does not possess the fund with which to repay their debt

    Hamish Jiddiyah

    A down payment by a party who intends to purchase certain goods and wishes to confirm their intention to do so


    The rule that every economic transaction is permissible, unless expressly and specifically forbidden by the Sharia


    A form of leasing. It involves a contract where the bank buys and then leases an item to a customer for a specified rental, over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance.

    Ijara with Diminishing Musharaka

    The principle of Ijara with Diminishing Musharaka can be used for home-buying services.

    One party’s ownership in an asset increases each time an additional capital payment is made; at the same time the other party’s ownership decreases by a similar amount. Parallel to this, a contract is agreed where the share of the asset which is not owned by one party is leased to them by the other.

    Sharia prohibits any clauses in contracts which make them interdependent on each other with a complicated outcome which is not Sharia compliant.

    This is not the case with IBB Ijara with Diminishing Musharaka contracts, where the outcomes are wholly Sharia compliant and are extremely straightforward for all parties.


    A form of partnership in which each partner contributes capital and has the right to work for the business but not necessarily equally

    Iqtisad Islami

    An Islamic approach to economic matters


    Wasteful expenditure


    Hiring or renting


    A contractural agreement for manufacturing specified goods that can be sold before it is manufactured or comes into existence, allowing cash payment for future delivery or future payments and future delivery.

  • A glossary of Islamic finance terms


    A non-binding contract

  • A glossary of Islamic finance terms


    Anything valuable which can be possessed, such as property


    Games of chance or gambling


    A transaction related to an exchange of goods or services


    An investment on your behalf by a more skilled person. It takes the form of a contract between two parties - one who provides the funds and the other who provides the expertise. The division of any profit is agreed in advance.


    A contract for purchase and re-sale for cost plus profit, which allows the customer to make purchases without having to take out a loan and pay interest


    To bargain on price, where the seller does not disclose the original cost of the goods


    Partnership. A Musharaka contract involves a person placing their capital with another person's capital and them both sharing the risk and reward.


    Exemption limit for the payment of Zakat

  • A glossary of Islamic finance terms


    A loan, free from any benefit

    Rab Al Mal

    The owner of capital

    Ras Al Mal

    Capital. The money or property which an investor places in a profit-seeking venture


    Interest or usury. Prohibited in Islamic law.


    Age of maturity


    Charitable giving. An act of charity.


    A loan which draws forth no profit for the creditor


    The occasion when the full price of the goods is paid in advance at the time of contract


    Currency exchange




    A sukuk has similar characteristics to a conventional bond with the key difference being that it is backed by tangible assets such as property.

  • A glossary of Islamic finance terms


    Known as ‘Islamic insurance’, Takaful means ‘guaranteeing each other’ in Arabic






    Trade or business


    The financial charge for using services, including salary, allowance, commission and fee

  • A glossary of Islamic finance terms


    A promise or undertaking


    The acceptance of sums of money for safe-keeping in a Sharia compliant framework


    An agency contract, which usually includes in its terms a fee for the expertise of the agent


    The third pillar of Islam. An obligatory contribution or tax which is prescribed by Islam on all Muslim adults having wealth above an exemption limit at a rate fixed by the Sharia.