1 ISLAMIC FINANCE TERMINOLOGIES

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1 1 ISLAMIC FINANCE TERMINOLOGIES

2 2 ISLAMIC FINANCE TERMINOLOGIES A أعدادية Adadiyyah (pl. adadiyyat) Countables i.e. things which are measured in individual units rather than by volume, weight, or length. An example of `adadiyyat are eggs which are customarily purchased in unit, (half dozen, dozen, etc.) rather than by weight. عدل Adl Adl is a general term which conveys the meanings of justice, equity and fairness. In rahn transactions, the person whom both the pledger and the one for whom the pledge is being made agree upon the custodian of the collateral. عفو Afw Afw is a Qur'anic term meaning surplus wealth. عامل Amil One who performs a task, an agent. One who deserves compensation for some task which he does, such as the mudarib in a mudarabah contract or a zakat collector. عقار Aqar Real estate, Immovable property such as land, buildings, trees and so forth. عقد Aqd Aqd is a central term in Islamic financial Fiqh which essentially means "contract." عرايا Araya (sing. Ariyyah) The term refers to palm trees which have been set aside by their owner for the needy, for a fixed period of time such as a year, so that they may feed themselves with its fruit. The case of araya is mentioned in the Hadeeth as an exception to the Prophetic prohibition of the muzabanah sale. That is, while he had forbade the people of Madinah from selling fruit on the tree for dried fruit--ostensibly because of the gharar inherent in such a transaction--the Prophet provided a dispensation in the case of `araya, allowing the poor who possessed dried dates to sell them to tree owners for access to the fruit on certain fruit trees for a year. أرض Ard Land

3 3 ISLAMIC FINANCE TERMINOLOGIES أربون Arbun Earnest money/down payment; a non-refundable deposit paid by the client (buyer) to the seller upon concluding a contract of sale, with the provision that the contract will be completed during the prescribed period. عارف Arif An expert who is consulted in situations which require an impartial, informed decision, such as the appraisal of property. عرية Ariya A contract in which one party loans another the use of some item for an indefinite period of time. Ariyah is generally used to refer to the neighborly lending of small articles عصبة Asabah The male relatives to whom one is related through another male only, e. g. one's father, paternal uncles, brothers and sons. عين Aayn Ayn is term used by the classical Fuqaha' to refer to currency or ready money. The term `ayn refers to gold, silver, coins, notes and any other form of ready cash. `Ayn is often contrasted with dayn. عينة Ainah A sale in which a purchaser buys merchandise from a seller for a stipulated price on a deferred payment basis and then sells the same merchandise back to the original seller for a price lower than the original purchase price. ابو حنيفة Abu Hanifah Al-Nu`man bin Thabit, pre-eminent 2nd/8th century Faqih of `Iraq after whom the Hanifi maslak is named. أحمد بن حنبل Ahmad bin Hanbal Ahmad bin Hanbal, 2nd/8th century pre-eminent Faqih and Hadeeth specialist after whom the Hanbali maslak is named. أجر Ajr Generally ajr means compensation or wage. In an ijarah contract, the ajr is the price paid by the hirer to the hired party in exchange for the services which the latter renders. أكل السحت Akl al-suht Unlawful acquisition of wealth

4 4 ISLAMIC FINANCE TERMINOLOGIES اآلجر الخاص Al-ajir al-khas A hired-worker who is contracted to perform a specific task in a specific amount of time by one party, such as a cook or a servant اآلجر المشترك Al-ajir almushtarak A worker, such as a tailor, who offers his services to many and thus may be contracted by several clients at once األجر المثل Al-ajr al-mithl The prevailing rate; the price which is normally paid for a given service. األكل بالباطل Al-akl bi lbatil Unlawful acquisition of wealth. األمين العام Al-amin al- `amm One who has been entrusted with the property of another for a reason other than safe-keeping (wadi`ah), such as a tenant who rents an apartment or the mudarib in the mudarabah contract. األمين الخاص Al-amin alkhas One who has been entrusted with the property of another and is responsible for it, as is the case in the wadi`ah (safe-keeping) transaction. األموال الربوية Al-amwal alribawiyah The six kinds of substances (gold, silver, dates, wheat, salt and barley) which, when exchanged in kind, must be exchanged in equal measure and with immediate transfer of possession. If these conditions are not met, then the exchange is considered to be riba. الشافعي Al-Shafi`i Muhammad bin Idris, late 2nd/8th century pre-eminent Faqih after whom the Shafi`I madhhab is named. أمانة Amanah Honesty, trustworthiness and loyalty. Amanah is a widely applied term in Fiqh which is used to refer generally to anything in the safe-keeping of another which must be guarded and preserved. آية Ayah Sign, the term refers to a passage from the Holy Qur'an.

5 5 ISLAMIC FINANCE TERMINOLOGIES اجر المثل Ajr al-mithl / Ajrul Mithl Reasonable wages; wages to which a person would be entitled under normal circumstances or customary in the community. فرض الكفاية Fard al Kifayah Socially obligatory duties. Literally, a collective duty of Muslims, the discharge of which by some of them absolves the rest of its performance, such as funeral prayers. Technically it covers such functions which the community fails to or cannot perform and hence are taken over by the state, such as the provision of utilities, building of roads, bridges and canals etc. عامل الزكوة Al-Aamilu-Alaz-Zakah Zakah collector. عالم Alim An Islamic religious scholar. Plural: Ulamaa. المفاوضة Al-Mofaviza General Partnership (one of the types of partnership under Musharakah) الشركة ذات المسئو لية المحدودة Al-sharikah dhat al-mas uliyah al-mahdudah The name for a private limited company in Egyptian law الوكالة المطلقة Al-wakala al mutlaqa Resale of goods with a discount on the original stated cost. Absolute power of attorney. اموال Amwal Wealth; in business context wealth that is contributed as capital in a partnership; (pl. of mal) عقدغيرعازم Aqd ghayr Azim A contract that is terminable at the will of the parties, like partnership. عقد صحيح Aqd Sahih A legal contract عقد Aqd Agreement, contract. عرض Ard / Ardh land; property that includes goods, slaves and even real estate; according to most jurists land is not eligible for enti tlement to profit as compared to other

6 6 ISLAMIC FINANCE TERMINOLOGIES things that are: wealth, labor, credit-worthiness qiyas (analogy); a principle of law; principal amount in a debt; see A s al-mal. الثمن المطلق Athmaan mutlaqah Absolute currencies; the term is usually applied to dinars and dirhams B باطل Batil Void, invalid. Said of a transaction, a contract which governs a transaction or an element in such a contract when they are null and void. opp. Sahih. بيع Bay Sale; an agreement between two parties (the seller and the buyer) to the effect that the ownership of the sale item is transferred from the seller to the buyer in exchange for a price بيع آجل Bay ajil Delayed-for-immediate sale. A type of sale in which the sale price is paid immediately and delivery of the sale item is delayed. بيع العينة Bay al-inah A prohibited type of sale in which one sells an item on credit then buys it back for a lesser price. بيع الكالي Bay al-kali Sale of a debt for a debt, it is a type of sale which the Prophet is reported to have prohibited. The Fuqaha' use this term to describe several different types of debt-for-debt exchanges. The most well-known of these is the exchange in which a lender extends his debtor's debt repayment period in return for an increase on the principal i. e. interest. The term kali' is a synonym for debt. بيع المؤجل Bay almu'ajjal Deferred payment sale, credit sale; a sale in which payment is delayed and delivery of the contracted goods is immediate. بيع السلم Bay al-salam Deferred delivery sale; a type of sale in which the sale price is paid immediately and delivery of a specified sale item is deferred for a stipulated period.

7 7 ISLAMIC FINANCE TERMINOLOGIES بيع بالثمن اآلجل Bay bithaman ajil Deferred payment sale, Some Islamic banks carry out a transaction of this name in which goods are requested by a client, purchased by the bank and then sold to the client at an agreed upon price which includes the bank's mark-up profit. Often the client is offered the option of paying in installments. This is essentially identical to the murabahah financing used throughout the Islamic banking sector. بيعتان في بيع Bayatan fi bay Two sales in one, a type of transaction which was explicitly prohibited by the Prophet. The meaning of the expression "two sales in one" is explained by the fuqaha' in various ways. Also called "safaqatan fi safaqah. بيت المال Bayt al-mal The treasury of the Muslim Community; historically, the bayt al-mal as an institution was developed by the early Caliphs but which soon fell into disrepair. The funds contained in the bayt al-mal were meant to be spent on the needs o the Ummah e. g. supporting the needy. بدل Badal Substitute; substitute compensation. بيع الدين بالدين Bai al Dayn bi addayn The exchange of a debt for a debt (prohibited based on a tradition and unanimously by the jurists based on ijma). بالغ Baligh Mature person; person who has attained puberty, the outward sign of majority and discretion, in the absence of which jurists determines different ages for the presumption of puberty. بضائع Buda ah Goods given to another for trading without giving wages or sharing profits (like a shopkeeper leaving his shop with another shopkeeper during his absence). D ضعيف Daif Weak, Said of a hadith which whose transmission is defective so that its authenticity is in question.

8 8 ISLAMIC FINANCE TERMINOLOGIES ضمان Daman Responsibility for financial coverage in the case of destruction or damage. ضمان المال Daman al-mal Liability for the debts of the partnership; the usual form of liability underlying all partnerships, especially one formed based on wealth. ضمان التلف Daman al-talaf Liability for damaging or destroying property ac cepted by the partnership for value-added work. ضمان الثمن Daman al-thaman Liability underlying a partnership formed on the basis of credit-worthiness where each partner is liable, jointly and severally, for paying the prince of goods bought on credit. دين Dayn Debt; some form of wealth which one is required to pay back to another. ذمة Dhimmah Dhimmah is a basic term in fiqh al-mu`amalat which roughly corresponds to the concept of liability. A debt is said to be "established in someone's dhimmah" if he is in debt to someone else. The Fuqaha' also speak about a person's dhimmah "being occupied" and "being cleared." The concept of dhimmah may be likened to a virtual liability container which it may be said that every responsible person has. These containers, it may be imagined, are constantly being filled with rights and obligations--such as the obligation to repay someone. دينار Dinar A gold coin used by Muslims throughout Islamic history. The standard mass of the dinar which is referred to in Fiqh is mithqal (app grams.) دية Diyah The compensation paid by one who commits manslaughter or unintentional homicide to the relatives of the deceased. F فقيه Faqih Muslim jurist; A Muslim who is an expert in Fiqh; a Muslim who is knowledgeable of the rules of the Shariah and knows how these rules are related to the source texts upon which they are based.

9 9 ISLAMIC FINANCE TERMINOLOGIES فقير Faqir A poor person (pl. fuqara) فسخ Faskh Undoing, dissolving, cancellation. Faskh is a term used by the classical Fuqaha to refer to the dissolution of a contract or agreement. It has been described as the cancellation of a contract, such that affairs return to the state in which they were before the closing of the contract, without any addition or subtraction. Many of the classical fuqaha' apply the term faskh to instances in which a previously valid (sahih) contract is cancelled voluntarily by the contractual parties--such as in iqalah, khiyar al-`ayb (option to return in case of a defect) and khiyar al-shart (stipulated option of return)--and use the term infisakh for cancellations which occur outside of the will of each of the contractual parties such as the cancellation of a sale contract when the sale item is destroyed, before the seller can hand it over to the purchaser or the dissolution of certain partnerships upon the death of one of the participating parties. فتو یو Fatwa (pl. fatawa) A formal response issued by an expert Faqih, called a mufti in response to a question. فضولى Fuduli A party is described as "fuduli" whenever it transacts (e. g. sells, rents, etc.) with someone else's property without the permission of the Shariah (e. g. wakalah). Such is the case when a party does not own the property with which it transacts and is not the wakil (authorized representative) or wali (guardian) of the true owner. For example, if a person were to negotiate and "close" a deal with a buyer in which he sold some machinery without the owner of the machinery having made him his wakeel (authorized representative) the "seller" would be described as fuduli. فرض Fard Obligatory, an act which is obligatory on Muslims فرض العين Fard Ain An action, which is obligatory on every Muslim فاسد Fasid Vitiated; irregular; unenforceable; used in the sense of voidable in the positive law, but a contract is voidable at the option of the parties, while the fasid contract can become valid only if the offending condition is removed.

10 10 ISLAMIC FINANCE TERMINOLOGIES افالس Falas Bankcrupt فلوس Fulus (pl. of fals) copper coin فدية Fidyah Compensation for missing or wrongly practising necessary acts of worship. Fidyah usually takes the form of donating money or foodstuff, or sacrificing an animal. فقهاء Fuqaha (singular, faqih) Jurists who give opinion on various issues in the light of the Quran and the Sunnah and who have thereby led to the development of Fiqh. G غرر Gharar A quality said to exist in a contractual transaction when an essential element of the transaction is indeterminate. The sale of an item which the seller does not possess for example is a gharar sale. Contractual transactions which contain gharar are batil i. e. void. Avoiding gharar in transactions is one of the essential principles of Islamic finance. غارم Gharim (pl. gharimun) A debtor who does not possess the funds with which to repay his debt. According to the Hanifi jurists, a gharim is one who whose funds, after repayment of his debt, would not equal the nisab. The Shafi`i and Maliki jurists divide the gharimun into two types: 1) those whose debts were incurred in their own benefit and 2) those whose debts were incurred benefiting others. The gharimun are one of the eight groups mentioned in the Qur an as legitimate recipients of zakah funds. غصب Ghasb The wrongful appropriation of property by force. غارم Gharim A person in debt; debtor unable to pay the debt from his wealth. غصب Ghasb Usurpation; abduction.

11 11 ISLAMIC FINANCE TERMINOLOGIES H حبل الحبلة Habal alhabalah A type of sale practiced by the Arabs during the Jahiliyyah, in which the essence of the agreement between the two transacting parties depended on a pregnant she-camel giving birth to a female calf which would subsequently become pregnant itself. The habal al-habalah transaction was prohibited by the Prophet, according to several well-known reports, ostensibly because of the extreme uncertainty in the essence of the contract, given that neither of the contractual parties can be even remotely certain that a pregnant she-camel would successfully give birth to a another she-camel, which would subsequently mature and become pregnant itself. حديث Hadith (pl. ahadith) A successively transmitted report of an utterance, deed, affirmation or characteristic of the Prophet Muhammad. The Ahadeeth are the source texts by which the Sunnah is preserved. حالل Halal Permissible, lawful; said of a deed which is not prohibited by Allah, opp. Haram. حق Haqq Truth, right, Al-Haqq is one of the names of Allah. In the Fiqh of financial transactions, the term haqq signifies a right which a party possesses, for example the creditors right to payment. حرام Haram Impermissible, unlawful, opp. Halal. حوالة Hawalah Debt transfer; a transaction in which debtor A transfers the obligation to repay his debt, which is due to lender B, to a third party C, who generally is already in debt to A. The result is that C now owes B and A is free from the burden of repayment. حول Hawl The term hawl is used by the jurists to describe the amount of time which must pass before a Muslim in possession of funds equaling or exceeding the exemption limit (nisab) must pay Zakah on his wealth. In the case of cash, gold and silver it is one Islamic year i.e. a lunar year of app. 354 days.

12 12 ISLAMIC FINANCE TERMINOLOGIES Hibah Gift هبة حسبة Hisbah Hisbah is a term used by the classical fuqaha', among them Ibn Taymiyyah, to describe the function of regulating the market place which is to be carried out by the Islamic authority (often called the muhtasib in this sense). Hisbah includes taking whatever steps may be needed in order to maintain a fair and orderly market place. Historically, various Islamic rulers have undertaken the duty of hisbah by supervising activities ranging from the inspection of eateries for sanitary conditions to the investigation of fraud. The basis of hisbah is the Prophet's customary inspection of the marketplace of Madinah. حكم Hukm (pl. ahkam) In Fiqh, the Shariah ruling (e.g. obligatory, recommendable, neutral, reprehensible, or forbidden) associated with any action. حصاة Husah Pebbles, a type of sale practiced by the Arabs in the Jahiliyyah and prohibited by the Messenger of Allah in which the sale was determined by the casting of pebbles. Classical commentators mention three forms of the husahsale: (1) the seller would say to the would-be purchaser, "when I throw the pebbles in my hand, then the deal is closed and binding on you," (2) the seller would say to the would-purchaser, "I shall sell you the commodity which your pebbles hit" or (3) in a land sale, the seller would say, "I shall sell you the plot of land whose dimensions are defined by the extent to which you throw this pebble." The husah sale--like the habal al-habalah sale (see entry) was ostensibly prohibited because of the gharar which characterized the contract which governed it. شركة العمل Harikat amal Partnership in which participation by the partners is based on labor or skill, but the partnership has to be of the type inan or mufdwadah. حيلة Heelah Legal device حم یى Hima Keeping people away from a land which was earlier treated as usable by all so as to restrict all outward benefits such as herbage, water and hunting to state use. حزم Hizim Binding; binding contract.

13 13 ISLAMIC FINANCE TERMINOLOGIES حدود Hudud The boundary between what is Halal (lawful) and what is Haram (unlawful), set by Allah. Whoever transgresses these limits may be punished or forgiven by Allah. حجاج Hujjah Legal proof or authority I احتكار Ihtikar Hoarding; the prohibited practice of purchasing essential commodities, such as food and storing them in anticipation of an increase in price. اجارة و إقتناء Ijarah wa iqtina Lease-and-purchase transaction; a financing instrument used by practitioners of contemporary Islamic finance in which a financier purchases reusable merchandise (e.g. airplane, buildings, cars) and then leases them to clients in return for an agreed upon rental fee (to be paid for the length of the lease period) and an agreement that the client will purchase the merchandise at the end of the lease period.. There are similar transactions of various names, among them al-ijarah al-muntaha bi-tamlik. اجماع Ijma Consensus, The unanimous consensus of the Muslim Ummah on a given issue, usually as represented by the agreement of the jurists. Ijma' has traditionally been recognized as an independent source of law, along with the Qur'an, Sunnah and Qiyas (analogical deduction), by most of the jurists. اجتهاد Ijtihad Effort, exertion, diligence. The process by which a qualified Islamic jurist (called a mujtahid) endeavors to arrive at the correct ruling on a given issue by reflecting on source texts from the fundamental sources of the Shari`ah: the Qur'an and Sunnah. إكتناز Iktinaz Hoarding wealth by not paying zakah on it. ايمان Iman Conviction, faith or belief; the acceptance and affirmation of Allah, His Books, His Messengers, His Angels, the Hereafter and Divine Decree.

14 14 ISLAMIC FINANCE TERMINOLOGIES انفاق Infaq Spending, normally in the path of Allah. Among the various praiseworthy types of infaq are spending on one's family, spending in preparation for jihad and feeding and clothing orphans and other underprivileged individuals. اقتصاد Iqtisad Moderation. The term is used in modern standard Arabic to denote the field of economics. إستصناع Istisna A type of sale, similar to salam, in which the price is paid in advance by the purchaser/contractor for specified goods which are subsequently manufactured and delivered on a stipulated date. إحياء الموات Ihya al-mawat Reviving of un-owned wasteland. One who re vives such land becomes its owner. إحياء األرض Ihya al-ardh Reviving barren lands. اختالط Ikhtilat Mixing of shares so that they can no longer be separated. انتفاق Intifaq Granting of concessions relating to real estate e.g. the right of passage and right to place a beam on the wall of the neighbor, etc. انتهاء Intiha End; termination; termination or dissolution of a partnership. إقالة Iqalah Negotiated rescission. اقطاع Iqta Granting of ownership or usufruct rights over state land by the state to individuals in recogni tion of their services for the sake of Islam. إرتحا ن Irtihan Pledging; mortgaging. اشتراك Ishtirak Equivocally; participation; partnership.

15 15 ISLAMIC FINANCE TERMINOLOGIES إستدانة Istidanah Raising or building up credit through credit purchases. It however does not apply to the raising of cash loans. إسناد Isnad The chain of transmission of a tradition. إسقاط Isqat The extinction of a right. إستدانة Istidanah Raising or building up credit through credit purchases; does not apply to the raising of cash loans; see istiqrad. إستحقاق الربح Istihqaq al-ribh Entitlement to profit; basis for entitlement to profit. إستقراض Istiqrad The raising of cash loans for business purposes, declared batil by al-sarakhsi as it is against the principle of prohibition of Riba. J جاهلية Jahiliyyah The Days of Ignorance, the so-called "pre-islamic period." The period between the Prophethood of `Isa bin Maryam (Jesus) and the Prophethood of Muhammad. Jahiliyyah is the term Muslims use to refer to the era just before the coming of the Prophet Muhammad and more generally to the state of affairs which characterized this era, which was plagued by shirk (the crime of associating partners with Allah), infanticide, tribal strife, etc. جائز Ja iz Permissible; permissible contract. جزية Jizya A tax imposed on non-muslims who are under Muslim country. جعالة Joalah / Joaalah The undertaking of one party (the Jael, bank or employer) to pay a specified amount of money to another party in return for rendering a specified service in accordance with the terms of contract.

16 16 ISLAMIC FINANCE TERMINOLOGIES K كفالة Kafalah Assumption of the responsibility for debt repayment; a standard Islamic financial transaction in which X (the kafil) agrees to assume responsibility for the debts of Y (the makful `anhu). Similar but not identical to hawalah. كفيل Kafil In a kafalah relationship, the party which assumes responsibility for repayment of the debts of another. خراج Kharaj Kharaj is a term used by the fuqaha' to describe a certain share of the produce of certain agricultural lands which is collected by the caliphate and added to the bayt al-mal. The term appears in a wider sense in a well-known hadith which came to constitute a basic principle of fiqh al-mu`amalat: profit (kharaj) goes with liability (daman). خيار Khiyar Option, choice, the option extended to one or more of the parties in a sales contract to rescind the sale, upon the appearance of a defect, for example. The jurists have traditionally recognized several different types of khiyar, including khiyar al-ru`yah, khiyar al-`ayb, khiyar al-shart, khiyar al-majlis. كفالة بالثمن Kafalah bi al-thaman Surety for paying the price or sum if unpaid by the person originally liable. كفالة باالنفس Kafalah binnafs Bail; surety for producing the body of the person wanted. كفيل Kafil Surety; person providing the surety; guarantor. خلط Khalt Mixing of shares; see ikhtilat. خمر Khamr Wine from grape juice. خراج Kharaj Tax on land of non-muslim subjects of an Islamic state; revenue from land.

17 17 ISLAMIC FINANCE TERMINOLOGIES خمس Khums A 20 per cent levy. It is applicable to spoils of war, mines and wealth burned in land that has no owner. خيار إذن Kihayr Izin Contract terminable at the will of either party. contract terminable at the will of either party. L لقطة Luqtah The term luqtah refers to an item misplaced by its owner which someone else finds. The topic of luqtah is treated in most standard Fiqh commentaries and is often accompanied by a discussion of the responsibilities of the one who finds the lost property. The questions discussed include: Should he leave it where he finds it? Should he take possessions of it in order to safeguard it until the owner comes back for it? Should he take possession of it and do what he wants with it. M مد Madd A dry measure equal to 1/4 sa` which was in use in Madinah during the time of the Prophet and continued to be part of the classical Islamic measurement system. مذهب Madhhab Way of going, pl. madhahib. A Fiqh school or orientation characterized by differences in the methods by which certain source-texts are understood and therefore differences in the Shari`ah rulings which are deduced from them. There are four well-known madhahib among Sunni Muslims whose names are associated with the classical jurists who are said to have founded them (Hanafi, Maliki, Shafi`i and Hanbali). مهر Mahr The obligatory gift, given by the groom to the bride, which is one of the integral components of a valid marriage agreement. مكروه Makruh Detested; technical term used by the Fuqaha' to classify actions with regard to their desirability. Makruh is said of an action which one is rewarded for avoiding, but not punished for committing.

18 18 ISLAMIC FINANCE TERMINOLOGIES مال Mal Wealth, money, property; any valuable thing which can be possessed. مالك Malik Malik bin Anas pre-eminent faqih of the late 2nd/8th century after whom the aliki madhhab is named. منفعة Manfaah Benefit, the yield which a utilizable property produces. The term is often used by the Fuqaha' to describe the usufruct associated with a given property, especially in leasing transactions. In an automobile lease for example, the term manfa`ah might be used to describe the benefit which the lessee derives from the use of the car for the duration of the lease (as opposed to the actual ownership of the vehicle). مقاصد الشريعة Maqasid al-shari`ah The Objectives of the Shariah. The term maqasid al-shariah refers to a juristicphilosophical concept developed by the later generations of the classical Fuqaha', who attempted to formulate the goals and purposes of the Shariah in a comprehensive manner to aid in the process of investigating new cases and organizing previous existing rulings. ميسر Maysar Gambling, a game of chance. Originally a game of chance played by the Arabs in the Jahiliyah, maysar came to refer to any game of chance. مسكين Miskin A poor, indigent person. The miskin is mentioned in the Qur'an as one of the recipients of zakah. معاملة Muamalah A financial transaction. Fiqh al-mu`amalat is the traditional Islamic discipline concerned with the jurisprudence of financial transactions. مضاربة Mudarabah A standard Islamic transaction between two parties in which one party, the rabb al-mal or investor, provides capital for a venture project and the other, the mudarib or entrepreneur, using his entrepreneurial skills, utilizes the capital to generate a profit. Profits arising from the mudarabah are distributed between the rabb al-mal and the mudarib according to a pre-determined ratio and any losses are borne by the investor alone.

19 19 ISLAMIC FINANCE TERMINOLOGIES مضارب Mudarib In a mudarabah contract, the party who acts as the entrepreneur-manager. مفتي Mufti A highly qualified jurisconsult who issues fatwa (informed legal pronouncements), usually in response to questions posed to him. مغارسة Mugharasah A type of agricultural contract similar to muzaraah in which a land owner and a worker agree that, in return for the worker's planting and tending of fruitbearing trees on the land owner's field, the landowner will assign to him a share of the orchard's harvest. مجتهد Mujtahid One who exerts himself) a highly qualified expert in fiqh who engages in independent legal reasoning (ijtihad). مخابرة Mukhabarah Mukhabarah is a term used by some of the classical fuqaha' as a synonym for muzara`ah (see entry) and by others to mean an arrangement between a landowner and a worker. Mukharabah is similar to muzara`ah except that in mukhabarah, supplies (e. g. seed) are provided by the worker while in muzara`ah they are provided by the landowner. مرابحة al-murabahah) Murabahah (Bay Originally a term describing any sale in which the seller ells his merchandise for more than the price at which he acquired it, the term murabahah is now used in contemporary Islamic finance to describe a financing scheme in which a financial institution agrees to purchase merchandise for a client provided that the client promises to purchase it from the financial institution at an agreed upon mark-up. This transaction, called simply murabahah or murabahah financing, is widely used in contemporary Islamic finance. مساقاة Musaqah A type of partnership in which the owner of an orchard agrees to share a stipulated portion of the produce of the orchard's trees with a worker, in exchange for the latter's irrigation of the garden. مشاركة Musharakah Partnership, a standard Islamic transaction in which two or more parties enter into any one of several related types of partnerships. In a typical musharakah agreement, two or more parties agree to provide capital (ra's mal) towards the

20 20 ISLAMIC FINANCE TERMINOLOGIES financing of a commercial venture, share profits according to a stipulated ratio and share losses on the basis of equity participation. مزابنة Muzabanah Essentially, muzabanah is a transaction in which the owner of fruit trees agrees to sell his fruit for an estimated equivalent amount of the dried fruit, such as palm fruit for dates or grapes for raisins. Muzabanah was an agricultural practice known to the people of Madinah and prohibited by the Prophet ostensibly because of the strong element of gharar present in such a transaction. مزارعة Muzara`ah Share-cropping; an agreement between two parties in which one agrees to allow a portion of his land to be used by the other in return for a part of the produce of the land. N نجش Najash The prohibited practice of deceiving and inciting a potential buyer during the course of pre-sale negotiations or bidding by egging him on, either through insincere bidding on the part of a spectator (such as bidding with no intention of buying and merely in order to have the would-be buyer raise his bid), or false statements on the part of the seller himself (such as the seller claiming that the commodity is of greater value than its true worth). نجس Najis Impure. نصاب Nisab The exemption limit for the payment of zakah. A Muslim who possesses wealth below the nisab is exempted from paying zakah, while a Muslim who possesses wealth at or above this exemption limit is obliged to pay zakah. The nisab differs depending on the type of wealth in question. Q قبض Qabd Seizing, taking possession of the exchange commodity in an exchange transaction, such as the exchanger taking possession of the silver which he traded for his own gold. It s being immediate is a necessary condition for the validity of currency exchange.

21 21 ISLAMIC FINANCE TERMINOLOGIES قرض Qard A loan, a transaction in which X lends Y some wealth (e.g. money) to be repaid after the elapsing of a specified amount of time. قرض حسن Qard hasan A loan granted for welfare purposes or to bridge short-term funding requirements; it could also take the form of a no remunerated deposit account. The borrower is required to repay only the principal. قمار Qimar A type of prohibited arrangement in which the acquisition of property is contingent upon the occurrence of an uncertain event, as is the case in gambling. قراض Qirad Another name given by the Malilkis to the contract of mudarabah, from the word qard. قبول Qubul Acceptance. قيراط Quirat Gold, coin used during the time of Holy Prophet PBUH R رأس المال Ra's al-mal Capital, the money or property which an investor (rabb al-mal) invests in a profit-seeking venture, often in a partnership (musharakah) such as a mudarabah or shirkah arrangement. رب المال Rabb al-mal In the mudarabah, the investor. رهن Rahn Collateral; a pledge or the transaction which governs such a pledge. ريتكافل Retakaful A form of Islamic reinsurance that operates on the takaful model. رب یو Riba Increase, any increase in a loan or sale transaction which accrues to the lender, seller or buyer, without the provision of an equivalent counter-value to the other

22 22 ISLAMIC FINANCE TERMINOLOGIES party. In Islam, riba is one of the most abhorrent of all sins and is absolutely prohibited. Riba encompasses various types of illict gain, of which banking interest is one example. ربوا الفضل Riba al-fadl The riba of exchange surplus. Any commodity-for-commodity exchange transaction (i. e. barter) in which the exchanged commodities are of the same type but of unequal measure, or the delivery of one commodity is postponed. ربوا النسئية Riba al-nasi'ah Postponement riba, it is one of the two categories into which riba is often divided by the Fuqaha', the other being riba al-fadl. Riba al-nasi'ah takes place when two ribawi substances are exchanged, one immediately and the other with a delay. ربوا الديون Ribaa al-diyvn ribaa al-diyvn (debt usury): Interest, same ribaa al-nase`a. Rishwah Bribery. رشوة ركن Rukn Pillar (pl. arkaan), an integral part of an act, such as a transaction, without which the act can not be said to have been performed. رب األرض Rabb al-ard Owner of land, owner of the land in Musaqah/Musaqat and Muzara ah contracts. رب العيب Radd bi-al-ayb Return of goods after a sale due to defects in the goods. رغبة Raghabah Property, which belongs to all people. Neither state nor individuals can prevent others from its lawful use. ركاز Rikaz Ancient wealth found hurried in land whose

23 23 ISLAMIC FINANCE TERMINOLOGIES S صاع Sa A dry measure in use in Madinah during the time of the Prophet in which dates, barley and other similar items were weighed. صدقة Sadaqah Charitable giving (pl. sadaqat). صحيح Sahih Sound, healthy, correct, said of a valid contract, A Hadeeth of the highest level of authentication. سلم Salam A type of sale in which the full price of the goods is paid in advance and the goods are delivered at a specified date in the future. صرف Sarf Currency exchange. شهادة Shahadah Testimony to the fact that Allah has the unique right to be worshipped to the exclusion of anything or anyone else and that the Prophet Muhammad is the Messenger of Allah by declaring, "Ashhadu an la ilaha illallah wa ashhadu anna Muhammadan rasulullah" (i.e. "I testify that there is no one or thing rightfully worshipped except Allah and that Muhammad is the Messenger of Allah). شريعة Shari`ah The Sacred Revealed Law of Islam which governs the affairs of Muslims. شرط Shart (pl. shurut) A necessary condition, something which needs to exist or be present in order for something (like a transaction) to be valid. Also a condition or stipulation in a contract. شركة Shirkah Any contract between two or more persons in which they agree to jointly enter into a financial enterprise whose profits will be divided between them.

24 24 ISLAMIC FINANCE TERMINOLOGIES شفعة Shufah The right of pre-emption in sale transactions, for example, a real estate sale in which some party possesses the right to force the seller to sell him all or part of the real estate in the event of a sale. صيغة al-`aqd) Sighah (Sighat Sighah is a term used by the Fuqaha' to refer to the formal exchange which takes place between the contractual parties indicating their willingness to enter into the contractual agreement and therefore constitutes the contract itself. The sighah is a rukn (integral element) of the Islamic contract and essentially consists of a proposal (ijab) on the part of one contractual party and an acceptance (qabul) on the part of the other, either of which may be verbal, written or even gestural, depending on the circumstances under which the contract is closed. سفتجة Suftajah A debt transfer transaction, practiced in Islamic societies since the `Abbasi period in which A, a debtor authorizes his agent (wakil) or someone who owes him a debt, to pay a given amount to C to whom A owes a debt. Suftajah is related to and may be considered a special case of the standard Islamic debt transfer transaction known as hawalah (see entry). سكوك Sukuk Sukuk is the Arabic name for a financial certificate but can be seen as an Islamic equivalent of bond. However, fixed income, interest bearing bonds are not permissible in Islam, hence Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Sukuk is a certificate of equal value representing undivided shares in ownership of tangible assets, usufruct and services or (in the ownership of) the assets of particular projects or investment activity. سنة Sunnah The actions, deeds, affirmations and characteristics of the Prophet Muhammad, the customary practice of the Prophet which informs the life of a Muslim. صدقة الفطر Sadaqah al-fitr A compulsory levy after the month of fasting (Ramadan). Every Nisab-holder has to give to the poor one saa (21/2 kg.) of commonly used grain for himself and each one of his depend ents. سمسرة Samsarah Brokrage, agency, business of commisson. See Simsar.

25 25 ISLAMIC FINANCE TERMINOLOGIES شخصية إعتبارية Shakhsiyah iitbariyah Juristic person; artificial personality; corpo rate personality. Sharik Partner شريك شركة الوجوه Sharikah al-wujuh Partnership based on credit-worthiness of the partners in which the ratio of profit and loss is based on the li ability borne, but the partnership has to be of the type inan or mufawadah. شركة عامة Sharikah amah General partnership; a partnership in which each partner is a general attorney for the other partners; a partnership that permits trading in all types of goods. شركة خاصة Sharikah khassah Special partnership; partnership for a single ven ture or for trading in a particular item; partnership in which each partner is a special attorney of the other partners. شركة مساهمة Sharikah Musahamah In Egyptian law it is the name for a corpora tion or for a public limited company. شركة Sharikah Partnership; in Egyptian law the term is used for joint-stock companies and corporations as well, but is qualified with an adjective to indicate its nature: thus, sharikah musahamah for a public limited company or a corporation whose capital has been subscribed to by the general public. شركة العنان Sharikat al- inan A basic contract of partnership based on agency in which participation may either be on the basis of wealth or labor or credit-worthiness, and in which equality of contribution or legal capacity is not necessary. شركة األبدان Sharikat al-abdan Another name for sharikat al-amal. شركة األموال Sharikat al-amwal A partnership in which participation is based on the contribution of wealth by all partners, but the partnership has to be of the type indn or mufdwadah.

26 26 ISLAMIC FINANCE TERMINOLOGIES شركة اإلباحة Sharikat al-ibahah Common rights of individuals to gather possesses and own free commodities. شركة الجبر Sharikat al-jabr Mandatory co-ownership created by an act of law, like inheritance. شركة المفالس Sharikat al-mafalis A partnership between persons whose assets have been reduced to copper coins and who have to buy on the basis of credit-worthiness; see sharikat al-wujuh. شركة الملك Sharikat al-milk Co-ownership. Sharikat al-mudarabah: see mudarabah. شركة التقابل Sharikat al-taqabbul Partnership for the acceptance of work, which is the same thing as a partnership based on labor or skill. شركة الذمم Sharikat al-zimam A term used by the Malikis to indicate a situa tion where two or more persons are buying goods on credit it is different from the Hanafi sharikat al-wujuh insofar as it requires the physical presence of all the partners at the time of purchase. Shira bi al-nasiah A credit-purchase. شراء بالنسئية شرب Shirb The right of irrigation. شركة العقد Shirikat al- aqd A partnership created through contract as opposed to co-ownership that may be the result of a joint purchase or agree ment or it may result from inheritance or from some other legal situation. شركة Shirkah Another form of the term sharikah. Partnership between two or more persons whereby, unlike mudarabah, all of them have a share in finance as well as entrepreneurship and management, though not necessarily equally. See Appendix II for details. شركة األعمال Shirkat al-amal See sharikat at-amal.

27 27 ISLAMIC FINANCE TERMINOLOGIES T تكافل Takaful Mutual support; Islamic insurance; an Islamically acceptable alternative to conventional commercial insurance which is based on the concept of mutual financial support. توارق Tawarruq Reverse murabahah. As used in personal financing, a customer with a genuine need buys something on credit from the bank on a deferred payment basis and then immediately resells it for cash to a third party. In this way, the customer can obtain cash without taking an interest-based loan. تعيين Ta yin Ascertainment of the goods sold through weight or measure. تبرع Tabarru Act of charity. Tafwid Delegation. تفويض تجارة Tahjir Earmarking a piece of wasteland that has no owner by an individual in order to rehabilitate it. (This establishes the right of ownership on such land). تخريج Takhrij Derivation; a methodology practiced by the Faqih, and that is based upon reasoning from principles. تخصيص Takhsis Restriction, restriction of the meaning of a text. U أمة Ummah The Muslim Community. علماء Ulamaa (pl. of Alim) The people of knowledge from amongst the Muslims who act on what they know and do what they say.

28 28 ISLAMIC FINANCE TERMINOLOGIES عروض Urudh (pl. of Ardh) property that includes goods, slaves and even real estate. عشر Ushr Ten per cent (in some cases five per cent) of agricultural produce payable by a Muslim as a part of his religious obligation, like Zakat W وديعة Wadi`ah Safe-keeping, deposit, The standard Islamic financial transaction in which entrusts property to Y for safe-keeping. Wadi`ah refers to the deposited property. وكالة Wakalah Agency; a standard Islamic practice wherein X (the wakil) acts as the agent of Y. In this capacity X may execute the affairs of Y. Wakalah is a widely applicable phenomena in Islamic practice which is often used in financial transactions: whenever a party cannot personally supervise a given affair, it deputizes another party to execute it on its behalf. وقف Waqf Cessation (pl. awqaf); a standard Islamic transaction in which one 'freezes' his property such that it is considered to have been arrested in perpetuity and can neither be sold, inherited or donated. The term waqf frequently refers to the property itself. The use of a waqf (e. g. a park) is often dedicated to the relief of the poor, the public at large or other charitable ends. وصية Wasiyyah Will, testament, bequest. The statement of a Muslim in which he details the manner in which his wealth is disposed of after his death. واجب Waijdb / Wajib Compulsory, obligation as distinguished from wujub (duty). Wakalah Agency وكالة Wakil Agent وكيل

29 29 ISLAMIC FINANCE TERMINOLOGIES Wakalah amah General agency. Wakalah khassah Special agency. Wakalah qasirah Restricted agency. وكالة عامة وكالة خاصة وكالة قاصرة ولي Wali Guardian والية Wilayah Guardianship والية اإلستدانة Wilayat al-istidanah Authority granted by one partner to another to buy on credit beyond the limit of the capital of the partnership. Z زكوة Zakah The third pillar of Islam; an obligatory alm-giving which every well-off Muslim is required to hand over to the Islamic authority for distribution to the poor and the needy. In the absence of the Islamic authority, well-off Muslims are required to distribute their alms among the poor and the needy, as prescribed by the Shari`ah, themselves. The payment of zakah is prescribed by Allah for all persons having wealth above an exemption limit (nisab) fixed in the Sunnah. زكوة الفطر Zakah al-fitr A small obligatory head-tax imposed on every Muslim who has the means for himself and his dependants. It is paid once yearly at the end of Ramadan before Eid al-fitr. زكوة المال 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. زكوة الحبوب Zakatul Huboob Zakah of grain/corn

30 30 ISLAMIC FINANCE TERMINOLOGIES Zakatul Madan Zakah of minerals زكوة المعدن زكوة الركاز Zakatur Rikaaz Zakah of treasure/precious stones زكوة ربح التجارة Zakatu-rid Tijaarah Zakah of profits of merchandise ذر Zar Seed; crop to be sown ظلم Zhulm A comprehensive term used to refer to all forms of inequity, injustice, exploitation, oppression and wrongdoing whereby a person either deprives others of their rights or does not fulfil his obligations towards them. ذمة Zimmah Equivalent of legal personality in positive law; receptacle for the capacity for acquisition.

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