Islamic Banking Terms Glossary - Hong Leong Islamic Bank

Islamic Banking Terms Glossary

 

Terms

Definition

1

Al-bai`

Sale contract

2

Al-ijarah thumma al-bai (AITAB) Lease contract followed by ownership of asset through a sale contract

3

Bai` `inah

Sale contract followed by repurchase by the seller at a different price

4

Bai` dayn

Sale of debt

5

Bai` bithaman ajil (BBA)

Sale contract based on deferred/installment payment at certain price

6

Bai` salam

Sale contract based on order of certain asset with certain specifications. Full payment is made in cash at the time of conclusion of the contract whereas the delivery of the asset is deferred to a specified time

7

Faraid

The knowledge or rules on estate distribution according to Islamic principles

8

Fiqh muamalat

A discipline of knowledge that discusses the rules relating to human affairs

9

Gharamah

Fine/penalty

10

Gharar

Uncertainty

11

Hibah

Gift

12

Ibra’

Rebate/waiver of partial or total claim against certain right or debt

13

Ijarah

Lease or service contract that involves benefit/ usufruct of certain asset or work for an agreed payment or commission within an agreed period

14

Istisna`

Sale contract by way of order for certain product with certain specifications and certain mode of delivery and payment (either in cash or deferred)

15

`Iwad

Consideration

16

Kafalah

Guarantee

17

Maysir

Gambling

18

Mudarabah

Profit sharing contract

19

Muqasah

Offsetting

20

Murabahah

Sale contract with a disclosure of the asset cost price and profit margin to the buyer

21

Musawamah

Sale contract without the disclosure of the asset cost price and profit margin to the buyer

22

Musyarakah

Profit and loss sharing

23

Musyarakah mutanaqisah

 

A contract of partnership that allows one (or more) partner(s) to give a right to gradually own his share of the asset to the remaining partners based on agreed terms

24

Qard

Loan contract

25

Rahn

Pledge/charge

26

Sukuk

Refers to certificates of equal value which evidence undivided ownership or investment in the assets using Shariah principles and concepts endorsed by the Shariah Advisory Council.

27

Ta`widh

Compensation

28

Tabarru’

Voluntary donation/contribution

29

Takaful

A scheme which is based on the spirit of cooperation and helping each other by providing financial assistance to participants when needed and all participants mutually agree to give contribution for the said purpose

30

Tawarruq/commodity murabahah

 

Purchasing an asset with deferred price, either on the basis of musawamah (refer no.21) or murabahah (refer no. 20), then selling it to a third party to obtain cash

31

Ujrah

Commission

32

Wa’d

Promise

33

Wadi`ah

Safe keeping contract in which a party entrusted his property to another party for safe keeping and to be returned upon request

34

Wakalah

Agency contract

35

Wakaf

A form of endowment by an owner of a property for public benefit and wellbeing which is allowed by Shariah

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