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Glossary (I-Q)
Glossary of Islamic Finance
Written by Dr. Taha Eltayeb Ahmed, Head of Product Structuring and Shariah Documentation
(About the Author)
Ijarah wal Iqtina (alternatively Ijarah Muntahia bil-Tamleek)
Ijab and Qubool: Ijab is an offer in a contract; and Qubool is an acceptance of an offer.
Ijarah: Sale of a definite usufruct of an asset in exchange for a definite reward (rental payments). It is an arrangement under which the Islamic bank leases equipment, building or other facility to a client, against an agreed rental amount.
Ijarah Mawsufah: A forward lease. It is a lease contract where the asset involved is not present there at the time of signing of the contract. The usufruct can only be realized on a future date, and hence the rent can be realized only in the future dates as well.
Ijarah wal Iqtina (alternatively Ijarah Muntahia bil-Tamleek)
A contract under which the Islamic bank finances equipment, building or other facility for the client against an agreed rental which includes a binding promise by the lessor to transfer the ownership of the leased property to the lessee, either at the end of the term of the lease period or by stages during the term of the contract. The lessee is under no obligation to buy the asset.
Ijma'a: Consensus of the majority of all the leading and qualified jurists on a certain matter in a certain time period. Such rules then become part of Shariah.
Ijtihad: The effort of a qualified Islamic jurist to interpret or reinterpret sources of Islamic law in cases in which no clear directives exist.
Istihsan: Judicial preference for one legal analogy over another, often in view of public interest. The strict application of Istihsan would require that preference be given to the soundest of the two analogies. Istihsan is one of many tools used by jurists in the process of Ijtihad (see Ijtihad above).
Jahala: Ignorance, lack of knowledge, indefiniteness and ambiguity in a contract often leading to Gharar.
Jua'alah: Wages, pay, stipend, or reward in exchange for a service provided.
Kafalah: Guarantee or surety-ship. In Kafalah a third party guarantees the performance of another party involved in a contract. Islamic scholars differ over whether a fee can be collected by the Guarantor in such a transaction.
Kharaj bi-al-Daman: It was narrated in a Hadith of Prophet Muhammad (peace and blessings of Allah be upon him) that gain accompanies liability for loss. This forms a basic principle of Shariah. For example, Islamic banks guarantee current accounts, and that is why they enjoy returns realized from the use of money in these accounts. (See Al Ghunm bil Ghurm).
Maaliki: Islamic school of law founded by Imam Maalik Ibn Anas. Followers of this school are known as Maalikis.
Manfaa: The usufruct or benefit derived from an asset. For example, in an Ijarah transaction Manfaa or the benefit of the leased asset is the subject matter underlying the contract. That is why Ijarah may also be defined as a sale of Manfaa (see Ijarah above).
Maysir: Gambling or playing games of chance with the intention of making an easy profit. Shariah considers Maysir a form of Gharar, and it is Haram act in Shariah law.
Mubah: An object that is lawful. It is any thing which is permissible to use or to trade in.
Mudarib: Managing partner in a Mudaraba (see Mudaraba). Generally, Mudarib is a contributor of labour and/or management rather than capital.
Mudaraba: A form of partnership where one party provides funds while the other party provides expertise and management. They agree to share profit on a pre-agreed ratio; but loss, if any, is borne by provider of funds.
Murabaha: A sale contract of a tangible asset for a mark-up (profit) above the cost of the asset, and an agreed mode of payment (payment can be spot but often defined in the form of installments). In Murabaha the seller has to reveal his cost to the buyer.
Musawamah: A general kind of sale in which price of the commodity to be traded is bargained between the seller and the purchaser without any reference to the price paid or cost incurred by the seller.
Musharaka: A partnership between two parties, both of whom provide capital towards the financing of a project. Both parties share profits on a pre-agreed ratio, but losses are shared on the basis of equity participation. Management of the project is carried out either by both parties or any one of them.
Nisab: Exemption limit for the payment of Zakat, which differs for different types of properties. For example, Nisab for Zakat on gold is 87.48 grams in weight of gold and Nisab for Zakat on silver is 612.36 grams in weight of silver.
Qabd: Possession of an asset.
Qard: An Interest free loan of any fungible commodity, including money.
Qard e Hasan: It is a benevolent loan contract between two parties for social welfare or for short-term bridge financing. Repayment is for the same amount as the amount borrowed. The borrower can pay more than the amount borrowed as long as it is not stipulated by the contract. The Islamic view of loans (see Qard) is that it is a moral duty of a Muslim to give Qard to needy borrowers free of charge.
Qiyas: Measure, comparison or analogy. A source of law, part of Islamic jurisprudence.
Qur'an: The Muslim holy book containing the words of Allah (God) revealed to his final messenger, Prophet Muhammad (peace and blessings of Allah be upon him) for the guidance of mankind.