| Term |
Definition |
| Ahadeeth |
Sayings and traditions of the Holy Prophet Muhammad (S.A.W.). Singular: Hadith. |
| Ahlar-ra'y |
Means people of opinion. It refers to people that are consulted on Islamic matters. These people are highly learned in Islam |
| Ahliyah |
Legal capacity |
| Ahliyat al-add' |
Legal capacity for execution |
| Ahliyat al-wujub |
Legal capacity for the acquisition of rights and obligations |
| AjrulMithl |
A remuneration based on what is customary in the community or Salary |
| Al-Wadi'ah |
This refers to deposits in trust, in which a person may hold property in trust for another, sometimes by implication of a contract |
| Amanah |
Something given to someone for safekeeping. Trust. The contract of amanah gives rise to Something given to someone for safekeeping. Trust. The contract of amanah gives rise to fiduciary relationships and duties |
| Amwal |
Wealth. In business context, Amwal means wealth that is contributed as capital in a partnership. Plural: mal. |
| Arbun |
Down payment; a nonrefundable deposit paid by a buyer retaining a right to confirm or cancel the sale. |
| Arkan |
The elements or essential ingredients of an act, without which the act is not legally valid. |
| 'Aqd |
A contract |
| Aqd Sahih |
A legal contract. |
| Bai' |
Sale. Commonly used as a prefix in referring to different types of sales: Muajjal, Murabaha and Wadi'ah. |
| Bai' Bithaman Ajil (Al), also spelled as Al-Bay-Bithaman Ajil (BBA) financing |
In modern Islamic banking, the term refers to a buying and selling transaction between the bank (or financial institution) and the customer, whereby the former buys a property (or an asset, e.g. a house) at the prevailing market price and sells it to the customer at a mark-up price where payments are made by installments over a period of time agreed upon by both parties. The profit earned by the bank is legitimate from the Shari'a point of view since the transaction is based on a sale contract rather than a loan contract. Any predetermined profit arising from the loan is prohibited in Islam as it amounts to Riba. |
| BaiMu'ajjal, also spelled as Bay Mu'ajjal |
Sale based on deferred payment, either in a lump sum or instalments. A form of Murahaba. |
| Bai Salam, also spelled as Bay Salam |
This term refers to the advance payment for goods which are delivered later. Normally, no sale can be effected unless the goods are in existence at the time of the bargain. But this type of sale is the exception to the general rule provided the goods are defined and the date of delivery is fixed. The objects of this type of sale are mainly tangible but exclude gold or silver as these are regarded as having monetary value. Barring these, bai al-salam covers almost all things which are capable of being definitely described as to quantity, quality and workmanship. One of the conditions of this type of contract is advance payment; the parties cannot reserve their option of rescinding it but the option of revoking it on account of a defect in the subject matter is allowed. It is also applied to a mode of financing adopted by Islamic banks. It is usually applied in the agricultural sector, where the bank advances money for various inputs to receive a share in the crop, which the bank sells in the market. |
| Batil |
Null and void |
| Dhaman |
Liability |
| Dayn |
Loan or debt |
| Diminishing Musharakah |
Another form of Musharakah (a financing mode), developed in recent years. According to this concept, a financier and his client participate either in the joint ownership of a property or equipment, or in a joint commercial enterprise. The share of the financier is further divided into a number of units and it is understood that the client will purchase the units of the share of the financier one by one periodically, thus increasing his own share until all the units of the financier are purchased by him so as to make him the sole owner of the property, or the commercial enterprise, as the case may be. |
| Fadl (Riba) |
A type of interest. Taking something of superior quality in exchange for the same kind of thing of poorer quality. Allah Subhana wa Ta'ala has strictly prohibited any kind of Riba and has warned of severe punishment for those who have any association with it. See the Holy Qur' an, Surah Al-Baqara (2):275-280 |
| Fard |
Obligatory. An act which is obligatory on Muslims. |
| Fard 'Ain |
An action which is obligatory on every Muslim. |
| Fatwa |
A legal verdict given on a religious basis. The sources on which a fatwa is based are the Holy Qur'an, SahihBukhari and Muslim, and all other authenticated Ahadeeth. Plural: Fatawa. |
| Fiqh |
Islamic jurisprudence |
| Fuqahaa |
Jurists |
| Gharar |
Uncertainty, hazard, chance or risk, ambiguity and uncertainty in transactions. Technically, the sale of something which is not present at hand; or the sale of something where the consequences or outcome is not known. It can also be a sale involving risk or hazard in which one does not know whether it will come about or not, such as fish in water or a bird in the air; or an event where assurance or non-assurance is subject to chance and thus not known to parties of a transaction. Can also mean uncertainty or a hazard that is likely to lead to a dispute in a contract. |
| Gharim |
A person in debt |
| Halal |
An act or product that is permitted by Islam |
| Hadith |
A saying or tradition of the Prophet Muhammad (S.A.W.). Plural: Ahadeeth. |
| Haram |
An act or product which is unlawful or prohibited in Islam |
| Hawala |
Contract of assignment of debt |
| Haq |
Legal right |
| Hijri |
Name of the Islamic lunar calendar. It took its name from the early Muslims who migrated from Mekkah to Madinah, and commences from the date of the Prophet Muhammad's (S.A.W.) Hijra, which he made with Abu Bakr as-Siddiq (A.S.), in 622 AC. Often abbreviated to A.H. (After Hijra) |
| Ijarah, also spelled ijara |
Literally means "to give something on rent" |
| Ijarahwaiqtina |
Contract of renting, hiring or leasing. This term refers to a mode of financing adopted by Islamic banks. It is a contract under which the Islamic bank finances equipment, a building or other facility for the client against an agreed rental together with an undertaking from the client to purchase the equipment or the facility. The rental as well as the purchase price is fixed in such a manner that the bank gets back its principal sum along with some profit, which is usually determined in advance. |
| Ishtirak |
Equivocally; participation; partnership |
| Istisna' |
This is a kind of sale, where a commodity or property is transacted before it comes into existence. It means to order a manufacturer to manufacture a specific commodity or property for the purchaser. If the manufacturer undertakes to manufacture the goods for him with material from the manufacturer, the transaction of Istisna' comes into existence. But it is necessary for the validity of Istisna' that the price is fixed with the consent of the parties and that necessary specification of the commodity (intended to be manufactured) is fully settled between them. This kind of sale, used as a mode of financing, is also called 'Parallel Istisna'. |
| Iwad |
Compensation or counter-value |
| Kafalah bi al-Thaman |
Surety for paying the price or sum if unpaid by the person originally liable. |
| Kafil |
A person providing surety or a guarantor |
| Makrooh |
Disapproved of, but not prohibited by Allah Subhana wa Ta'ala |
| Murabaha |
Sale at a known profit margin. The seller purchases the goods desired by the buyer and sells them at an agreed mark-up price. The payment being settled within an agreed time frame, either in instalments or lump sum. The seller undertakes all management needed for the purchase and also bears the risk for the goods until they have been delivered to the buyer. |
| Mudaraba |
An agreement between two or more persons whereby one or more of them provide finance, while the other(s) provide enterpreneurship and management to carry on any business venture whether trade, industry or service with the objective of earning profits. The profit is shared in an agreed proportion. The loss is borne by the financiers only in proportion to their share in the total capital. |
| Mudarib |
The partner who provides entrepreneurship and management in a Mudharabah agreement |
| Mufti |
One who passes verdicts |
| Musharakah |
A temporary equity participation agreement between a bank and a client for effecting a certain operation within an agreed period of time. Both parties contribute to the capital of the operation in varying degree and agree to divide the net profits or losses in proportions agreed upon in advance. |
| Mustahab |
Recommended, but not obligatory. |
| Nis'a (Riba al) |
A type of interest. Taking interest on loaned money. An act which is Haram. See the Holy Qur'an, Al-Baqara (2):275-280 and Aali'imran(3):13O |
| Nisab |
A threshold of wealth of which any excess is subject to Zakah. |
| Qabz |
Possession |
| Qard-Hassan |
A loan extended without interest or profit-sharing |
| Qard |
A loan without interest given for a good cause in the name of Allah, in hopes of repayment or reward in the Hereafter. |
| Quadaa |
Paying in a debt |
| Ra's al-mal |
Capital invested in Mudarabah or Musharakah. |
| Rabb al-ard |
Owner of the land in Musaqah or Musaqat and Muzara'ah contracts |
| Rahn |
Pledge or mortgage. |
| Riba |
Increase, addition, expansion or growth on the loan. However, not every increase or growth is prohibited by Islam. Under the Shari'a, Riba technically refers to the premium that must be paid without any consideration. According to the jurists of Islam, this definition covers the two types of Riba, namely Riba Al Fadhl and Riba Al Nasi'ah. |
| |
Example 1 of Riba: If A sells OMR100 to B with OMR110. The premium of OMR10 is without any consideration or compensation. Therefore, this amount of $10 will be Riba. |
| |
Example 2 of Riba: If A lends OMR100 to B (a borrower) with a condition that B shall return him OMR110 after one month. In this case, the premium paid that must be paid by the borrower to the lender along with the price is Riba because the premium of OMR10 is without any consideration. |
| Salam |
Sale with deferred delivery of exchanged good but with advanced price payment |
| Sarf |
Currency exchange |
| Rabbu al-Mal |
The financier in the mudaraba form of partnership agreement. Plural of Arbabu al-mal. The Rabbu al-mal provides the finance while the mudarib provides the entrepreneurship and management. There can be many Arbabu al-mal and mudaribs in a given muddrabah agreement. |
| Shari'a |
Islamic law as ordained by Allah Ta'ala. Literally it means 'a road'. The Shari'a is the legal and social modality of a people based on the revelation of their prophet. The last Shari'a in history is that of Islam. It abrogates all previous Shari'as. It is, being the last, therefore the easiest to follow, for it is applicable to the whole human race wherever they are. |
| Shurut |
Terms and conditions in Islamic law |
| Shukuk |
Certificates of investment; plural of Shak |
| Sunnah |
All the traditions and practices of Prophet Muhammad (S.A.W.), that are recorded not only in such books as SahihBukhari and Sahih Muslim, but also in living people to whom these traditions and practices have been transmitted, from person to person, from then until now |
| Takaful |
Islamic Insurance. A scheme of mutual support that provides insurance to individuals against hazards of falling into unexpected and dire need |
| Tijaarah |
Trade. Act of buying and selling. |
| Ushr |
Ten percent (in some cases five percent) of the agricultural produce payable by a Muslim as part of his religious obligation, like zakah, mainly for the benefit of the poor and the needy |
| Wadi-ah |
Deposit |
| Wakalah |
Agency |
| Waqf |
Endowment. A charitable trust in the name of Allah, usually in perpetuity, and usually for the purposes of establishing the Deen of Islam, teaching useful knowledge, feeding the poor or treating the sick |
| Zakah Al-Mal |
The Muslims' wealth tax: One must pay 2.5% of one's yearly savings above a certain amount to the poor and needy Muslims. The Zakah is compulsory on all Muslims who have saved (at least) the equivalent of 85g of 24 carat gold at the time when the annual Zakah payment is due |
| Zakatu- Al tijaarah |
Zakah of profits of merchandise |