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Glossary (R-Z)
Glossary of Islamic Finance
Written by Dr. Taha Eltayeb Ahmed, Head of Product Structuring and Shariah Documentation
(About the Author)
Rabb al Maal: An investor or contributor of capital in a Mudaraba transaction (see Mudaraba above).
Rahn: A property given as collateral for payment of an obligation. If in case the debtor fails to make payment, then the creditor can liquidate that property to settle the debt.
Riba: Riba denotes the "additional" amount that a lender receives, or a borrower pays, which is in excess of the principal amount of loan given either in money or kind, specified as a condition of a Qard contract. Riba also includes penalty or charge for delay of payment of debt.
Ribawi: A transaction in which Riba is present. The following items are classified as Ribawi in Shariah: cash, gold, silver, wheat, barely, dates and salt. A loan in these commodities with an increase in exchange is a Ribawi transaction, which means it involves Riba.
Sadaqah: Voluntary charitable contribution by a Muslim seeking the pleasure of Allah (God).
Shart: A stipulation in a contract.
Shariah: Divine guidance as given by Holy Qur'an and Sunnah of Prophet Muhammad (peace and blessings of Allah be upon him). Shariah embodies all aspects of Islamic faith, including beliefs and practices.
Shariah Supervisory Board: A body of qualified Shariah Scholars responsible for ensuring that the products and contracts of an Islamic financial institution comply with the principles of Shariah.
Shafi'e: Islamic school of law founded by Abu Abdullah Ahmad bin Idris or Imam Shafi'e. Followers of this school are known as Shafi'ees.
Suftajah: A Bill of Exchange between three parties (payer, payee and transmitter), which was used for the delegation of credit during the Muslim period, especially the Abbassi period. It was used to collect taxes, disburse government dues, transfer of funds by merchants and was commonly used by traveling merchants. Suftajahs could be payable on a future date or immediately.
Sukuk: Islamic bonds. Asset backed bonds which are structured in accordance with Shariah. Most of these bonds may be traded in the market, depending upon how they are structured. Sukuk represent proportionate beneficial ownership in the underlying asset(s), which will be leased to the client in order to yield return on the Sukuk. Singular of Sukuk is Suk.
Sunnah: It refers to what Prophet Muhammad (peace and blessings of Allah be upon him), said, did, or approved during his life time.
Tabarru': A donation or gift whose purpose is not commercial, but it is for seeking forgiveness and consideration of Allah (God). This concept has been used in the structuring of Islamic Insurance (Takaful).
Takaful: Arabic for solidarity (collective protection). This term means mutual assurance or insurance under Shariah. In some Muslim countries the term is used as a name for Islamic Insurance. In other countries it is used for life Insurance.
Tawarruq: In personal financing, a client with a genuine need buys an item 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 client can obtain cash without taking out an interest-based loan. Islamic banks have used this type of arrangement intensively to place money with each other.
Trustee: A person, who has the legal responsibility for holding title in a property for the benefit of another person or party.
Ulema: Shariah scholars. Islamic jurists who are well versed in Shariah. Ulema is plural of Alim.
Ummah: The Islamic nation beyond all national boundaries, ethnicities, colors and races. Used to refer to the worldwide community of Muslims.
Urf: A custom or generally accepted practice. It becomes part of Islamic law if it does not violate any stipulation of Shariah.
Wadia: Safe keeping a property for a fee. Islamic banks in the Middle East use this concept for safe deposit boxes
Wakalah: A contract of agency in which one person appoints some one else to perform a certain task on his behalf, usually for a certain fee.
Waqf: A charitable trust (plural is Awqaf). An endowment or a charitable trust set up for Islamic purposes. It involves tying up a property in perpetuity so that it cannot be sold, inherited, or donated to anyone. Waqfs are usually set up for masjids, education, or for benefit of poor.
Zakat: An annual, specified wealth tax to be paid to specific people, by a Muslim possessing a minimum specified amount of wealth.
Referenced websites:
State Bank of Pakistan, American Journal of Islamic Finance, Islamic Development Bank, and Guidance Financial Group