Islamic Finance Terminologies
Bai Inah: Double sale by which the borrower and the lender sell and then resell an
object between them, once for cash and once for a higher price on credit.
Gharar: It means any element of uncertainty in any business or contract.
Hibah: it means Gift.
Ijarah: Sale of a definite usufruct of any fixed asset in exchange of definite
Istisna: It is a contractual agreement for manufacturing goods wherein payment is
made in advance and delivery in future
Maisir: it mean gambling.
Mudarabah: A form of partnership where one party provides the funds while the other
provides expertise and management. The former is called Rabul Maal and
the latter is referred to as the Mudarib. Any profits accrued are shared
between the two parties on a pre-agreed basis, while loss is borne by the
provider of the capital.
Murabaha: It means a sale on mutually agreed profit. Technically, it is a contract of
sale in which the seller declares his cost and profit.
Musawamah: Its is a general kind of sale in which price of the commodity to be
traded is bargained between seller and the purchaser without any
reference to the price paid or cost incurred by the former.
Musharakah: It means a relationship established under a contract by the mutual
consent of the parties for sharing of profits and losses in the joint
Qimar: It means gambling.
Riba: An excess or increase.
Shirkah: A contract between two or more persons who launch a business or
financial enterprise to make profits.
Salam: It means a contract in which advance payment is made for goods to be
delivered later on.
Sukuk: Plural of 'Sakk', which refers to a financial paper showing entitlement of
the holder to the amount of money shown on it.
Takaful: An equivalent to the contemporary insurance contract whereby a group of
persons agree to share a certain risk (for example, damage by fire) by
collecting a specified sum from each. In case of loss to any one of the
group, the loss is met from the collected funds.
Tabarru: Any benefit that is given by a person to other without getting anything in
exchange is called Tabarru'.
Wakalah: A contract of agency.