Glossary

Sale or contract of sale.

A contract involving the sale and buy-back transaction of assets by a seller. A seller sells an asset to a buyer on a cash basis and later buys it back on a deferred payment basis where the price is higher than the cash price. It can also be applied when a seller sells an asset to a buyer on a deferred basis and later buys it back on a cash basis, at a price which is lower than the deferred price.

A Murābahah-based purchase and sale transaction of Sharī`ah- compliant commodities, whereby the buyer purchases the commodities on a deferred payment basis and subsequently sells them to a third party on a cash payment basis.

Darūrah is an exigency in the event that if the necessary act is not done, then it shall lead to the destruction of five fundamental needs, namely religion, life, intelligence, progeny and property. The principle of Darūrah is only applicable in exceptional circumstances where the avoidance of the specific necessary act shall ruin the said fundamentals.

A juristic opinion or pronouncement of facts given by the Sharī`ah board, a Mufti, or a Faqīh on any matter pertinent to Sharī`ah issues, based on the appropriate methodology.

Deceptive uncertainty where details concerning the sale contract are unknown or uncertain.

Repurchase

An Ijārah contract is an agreement made by an institution offering Islamic financial services to lease to a customer an asset specified by the customer for an agreed period against specified instalments of lease rental. An Ijārah contract commences with a promise to lease that is binding on the part of the potential lessee prior to entering the Ijārah contract.

An Istisnā` contract is an agreement to sell to a customer a non- existent asset, which is to be manufactured or built according to the buyer‟s specifications and is to be delivered on a specified future date at a pre-determined selling price.

Guarantee

Charging fee for guarantee

Gambling

Floating rate

Fixed rate

Swap

Profit rate swaps

A Muḍārabah contract is an agreement between the capital provider and a skilled entrepreneur whereby the capital provider will contribute capital to an enterprise or activity, which is to be managed by the entrepreneur as the Muḍārib. Profits generated by that enterprise or activity are shared in accordance with the terms of the Muḍārabah agreement, whilst losses are to borne solely by the capital provider unless the losses are due to the Muḍārib’s misconduct, negligence or breach of contracted terms.

Labour provider

A Murābahah contract is an agreement whereby the institution offering Islamic financial services sells to a customer a specified kind of asset that is already in their possession at cost plus an agreed profit margin (selling price).

A Mushārakah contract is an agreement between the institution offering Islamic financial services and a customer to contribute capital to an enterprise, whether existing or new, or to own a real estate or moveable asset, either on a temporary or permanent basis. Profits generated by that enterprise or real estate/asset are shared in accordance with the terms of the Mushārakah agreement, whilst losses are shared in proportion to each partner‟s share of capital.

A believer in or adherent of Islam.

A non-interest bearing loan intended to allow the borrower to use the loaned funds for a period with the understanding that the same amount of the loaned funds would be repaid at the end of the period.

A contract to pledge a specified asset as security against a debt whereby the creditor (Murtahin) is entitled to hold custody of the asset. In the event of default by the debtor (Rāhin), the creditor may sell the asset.

Islamic re-insurance

Usury

Donation

A Salam contract is an agreement to purchase, at a pre-determined price, a specified kind of commodity not available with the seller, which is to be delivered on a specified future date in a specified quantity and quality. The institution offering Islamic financial services, as the buyer, makes full payment of the purchase price upon execution of a Salam contract. The commodity may or may not be traded over the counter or on an exchange.

Divine Islamic law that encompasses all aspects of human life as revealed in the Qur’an and the Sunnah.

Sukūk (certificates) each of which represents the holder‟s proportionate ownership in an undivided part of an underlying asset where the holder assumes all rights and obligations to such an asset.

Grant of property by a person with complete legal capacity without any compensation. In the context of Takāful operations, Tabarru’ is the amount of contribution to be relinquished by the Takāful participant as a donation for fulfilling the obligation of mutual help and to be used to pay claims submitted by eligible claimants.

Hedging

Takāful is derived from an Arabic word which means solidarity, whereby a group of participants agree among themselves to support one another jointly against a specified loss. In a Takāful arrangement, the participants contribute a sum of money as Tabarru’ (donation) into a common fund, which will be used for the mutual assistance of the members against specified loss or damage.

Purchasing an asset with deferred price, either on the basis of Musawamah (sale contract without the disclosure of the asset cost price and profit margin to the buyer) or Murābahah, then selling it to a third party to obtain cash.

A promise to perform certain action(s) in the future.

An agency contract where the customer (principal) appoints the institution offering Islamic financial services as an agent (Wakīl) to carry out business on their behalf.

A property that produces income and that may have been deeded to benefit a community.