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Glossary of Islamic Financial Terms


amanah : trust.


'arbun : down payment; a nonrefundable deposit paid by a buyer retaining a right to confirm or cancel the sale


'ayn : a tangible (physical) asset


bay' : sale


bay' ajil : credit sale where price payment is deferred to a determined future date


dhaman : liability


dharar : harm, damage


dayn : debt


fatwa : an authoritative legal opinion based on Islamic law (Shariah)


fiqh : science of Islamic law


ghabn : lesion


gharar : deception; a gharar sale is an exchange with uncertain payoffs where one party wins but the other loses.


hadith : reported sayings and teachings of Prophet Mohammed, peace be upon him


halal : permissible, lawful


Hanafi : one of the four major schools of fiqh, founded by Abu Hanifa


Hanbali : one of the four major schools of fiqh, founded by Ahmad ibn Hanbal


hawala : contract of assignment of debt


ijarah : contract of lease and hire; sale of usufruct (manfa'ah)


ijtihad : effort by a qualified fiqh scholar to evaluate a certain act or transaction according to Shari'ah principles.


istisna : contract providing for the manufacture and purchase of a specified item


jahalah : ignorance


ja'alah : a unilateral contract promising a reward for a specific act or accomplishment


kafalah : guaranty


Maliki : one of the four major schools of fiqh, founded by Malik ibn Anas


manfa'ah : usufruct. Sale of usufruct is ijarah


maysir : games of chance


mudharaba : a form of partnership where one side provides only capital while the other only labor


murabaha : sale with determined markup. In current practice of Islamic banks, murabaha requires the bank to purchase an asset upon request of a customer in order for the latter to buy it on a deferred payment basis


musharakah : partnership, sharing


qabdh : possession


qardh : loan


rahn : pledge, collateral


riba : usury, profit or gain in excess of principal loan


sadaqa : charity


salam : sale with deferred delivery of exchanged good but with advanced price payment


sarf : currency exchange


Shafi'i : one of the four major schools of fiqh, founded by al-Shafi'i


Shariah : the Islamic law established by Qur'an and Sunnah


Sunnah : teachings of Prophet Mohammed, peace be upon him


thimma (zimma) : the capacity to accept obligations and duties


wakalah : agency.


Zakah : obligatory charity.



al-wadiah = safe keeping

bai'muajjal = deferred-payment sale

bai'salam = pre-paid purchase

baitul mal = treasury

fiqh = jurisprudence

Hadith = Prophet's commentary on Qur'an

hajj = pilgrimage

halal = lawful

haram = unlawful

ijara = leasing

iman = faith

mithl = like

mudaraba = profit-sharing

mudarib = entrepreneur-borrower

muqarada = mudaraba

murabaha = cost-plus or mark-up

musharaka = equity participation

qard hasan = benevolent loan (interest free)

qirad = mudaraba

rabbul-mal = owner of capital

riba = interest

Shariah = Islamic law

shirka = musharaka