A Comprehensive Glossary of Terms in Islamic Commercial Law – Business, Banking and Finance

Abstract

A worthy reader of the JIBM suggested us to give glossary of the technical terms at the end of the each Issue of the JIBM. Keeping in view the potential benefit of such a glossary for easy and general understanding of various aspects of Islamic banking and finance, a comprehensive glossary of pharases used in Islamic commercial law is given hereunder.

Full text

A Comprehensive Glossary of Terms in Islamic
Commercial Law – Business, Banking and Finance
Muhammad Ayub
1
‘Adadiya: Countables, items of Māl which are measured as units and not
by weight, length or volume, i.e. eggs or some fruits sold as units (dozen
or half a dozen).
‘Ādil: Person who remains steadfast on justice, an honest and trust worthy
individual who makes just decisions even though it be against himself.
‘Adl: ‘Adl is a general term which means justice, equity, equitableness
and fairness.
‘Ahd: An undertaking or a unilateral promise. Sometimes it also covers a
bilateral obligation.
‘Ahdnāma: A statement of promise or undertaking, the term used in
literature coming from Iran or Turkey origion.
‘Āmil: A worker entitled to remuneration, i.e. the Mu╔ārib in a
1
For preparation of the comprehensive glossary, inference has been taken from various
glossaries available in the literature, particularly, in the book “Understanding Islamic
Finance”, John Wiley and Sons, 2007; “Islamic Capitalism and Finance” by Prof. Murat,
Edward Elgar, 2011; Glossary of „Alfalah‟ and many others. We are grateful to all of
them. The mistakes or problems, if any, belong to the author; may kindly be brought into
notice at editor.jibm@riphah.edu.pk . The glossary of technical terms used normally in the
literature on Islamic finance will be given in the next Issue, inshaAllah..
A worthy reader of the JIBM suggested us to give glossary of
the technical terms at the end of the each Issue of the JIBM.
Keeping in view the potential benefit of such a glossary for easy
and general understanding of various aspects of Islamic
banking and finance, a comprehensive glossary of pharases
used in Islamic commercial law is given hereunder. In the
following Issues, glossary of new or additional words will be a
permanent feature of the JIBM, inshaAllah.

2 Journal of Islamic Business and Management Vol.2 No.2, 2012
Mu╔ārabah contract or a Zakat collector.
‘Aqāi’d: Matters of belief and worship manifested in rituals pertaining to
relationship between God and man.
‘Aqd: ‘Aqd is a central term in Islamic business law, which means,
"contract." ‘Aqd also refers to any transaction, which takes place and
creates any right and liability for the parties.
‘Aqd al-Bai‘: A sale contract.
‘Aqd Bā═il: A void or invalid contract that does not fulfill the conditions
relating to main elements of sale, for example, like offer and acceptance,
subject matter or the consideration and possession or delivery of the
subject matter or involves some illegal external attributes like involvement
of Riba, Gharar or Qim┐r.
‘Aqd Ghair Lāzim: Revokable contract, a contract in which any of the
parties has the right to revoke it even if the other does not wish to revoke.
‘Aqd Izin: The authorization granted by depositors to financial
institution (Islamic bank) to invest their deposits in bank‟s business. It is
in case of non-remunerative Current Accounts that are considered as
Wadi‘ah.
‘Aqd Lāzim: A contract in which none of the parties has unilateral right
to revoke the conrtract (without the consent of the other).
‘Āqilah: Kins or the persons of relationship who share any responsibility;
an ancient „Arab custom considered to be the essence of modern Islamic
insurance.
‘Arb┴n: (See Bai‘ al-‘Arbūn).
‘Ārif: An expert, who is consulted in situations which require an
impartial, informed decision, such as the appraisal of property.
‘Āriyah „Arāya: Gratuitous loan of non-fungible objects; loan of a
particular piece of property, the substance of which is not consumed by its
use, without anything taken in exchange. In other words, it is the gift of
usufruct of a commodity that is not consumed on use. It is different from
Qar╔ that is the loan of fungible objects which are consumed on use and in
which the similar and not the same commodity has to be returned. The
borrowed commodity is treated as liability of the borrower who is bound
to return it to its owner. ‘Āriyah is generally used to refer to the neighborly

Journal of Islamic Business and Management Vol.2 No.2, 2012 3
lending of small articles. [‘Āriyah and „Arāya are two different terms I
am correcting again and again, Pl. Take care, otherwise, it may be a
serious problem for all of us)
‘Ayn: Plural A‘ayān, determinate property; Property that is not Dayn – the
things that could be used for paying a liability; generally the commodities
of material value in themselves;
Ahādith: Plural of Hadith, which means traditions of the Holy Prophet
Muhammad (pbuh) about his instructions, utterances, actions, and actions
of Companions tacitly approved by Him.
Aj┘r: An employee, a wage earner who renders any service for someone
against fee or wage.
Aj┘r al-‘Āam: An employee who is not restricted to the employment of a
single employer but in fact is free to work for another person or persons as
long as he fulfills his duties responsibly towards each of them.
Aj┘r al-Khā╖: An employee for a specified person, who only serves one
beneficiary such as a cook or a servant.
Aj┘r al-Mushtarak: A worker who may concurrently serve or be
contracted by a number of clients, for instance a lawyer. It also refers to a
worker, such as a tailor, who offers his services to many and thus may be
contracted by several clients at one point of time.
Ajr: Remuneration or recompense. In a service Ijārah, the Ajr is the price
paid to the employee by the employer in exchange for services rendered.
Ajr al-Mithl: Rent or wage to be decided by a judge or arbitrator, or the
prevalent wage; the standard rate for a particular service.
Ajr al-Musammah: Agreed rent or wage in Ijārah or ‟Ujrah contracts.
Akhlāq: Plural of Khulq, the term refers to the practice of ethical values,
morality and manners.
Al-╗arf: (See also Bai„ al-╗arf), sale of gold / silver, currencies or of
monetary value for monetary value. In Islamic law such exchange is
permitted only when it is done simultaneously.
Al-Akl bil Bā═il: Unlawful/ wrongful acquisition of wealth.
Al-Am┘n al ‘Āam: 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 Mu╔ārib in the Mu╔ārabah contract.

4 Journal of Islamic Business and Management Vol.2 No.2, 2012
Al-Am┘n al Kha╖: Trustee for property given for safe-keeping as in the
Wadi„ah contract.
Al-Ghunm bil-Ghurm: An ‘Arabic proverb which means that earning
profit is legitimized only by taking normal business risk and engaging in
an economic venture. This provides the rationale and the principle of
profit sharing in Shirkah arrangements; similar to Al-Khar┐j bi ╕am┐n.
Al-Hājjah al-A╖liyah: Basic needs. Tech: In relation to the law of Zakat,
the Sharī„ah has exempted those assets which are required to fulfill one's
basic needs. Also spoken with regard to economic role of the Islamic state.
The Islamic state is responsible to provide for the basic needs of all
citizens, should some of them fall short of the means.
Al-Hisbah: The institution of ombudsman, a social regulatory body
empowered to check imbalances in the market for purpose of re-
establishing a better semblance of market-driven exchanges in the light of
the principles of justice.
Al-Kharāj bi-╕amān: The Islamic legal principle to mean that
entitlement to return on any investment follows assumption of
responsibility. Profits, therefore, are based on the ownership of, and
responsibility for, capital.
Al-Muflis: Bankrupt, person whose debt is larger than his assets; can be
declared bankrupt by the court.
Al-Wa╔i‘ah: Resale of goods with a discount on the original cost; a kind
of Buy┴‘ al-Amānāt.
Al-Wadi‘ah bid ╕amān: Goods or deposits given for safekeeping with
permission to use by the trustee. The depository becomes the guarantor for
repayment on demand, of the deposits or any part that remains outstanding
in the accounts of depositors.
Am┘n: Trustee, a person safeguarding others‟ entrusted property as if it
was his own, he is not liable in case of any damage to the trust property
without any negligence on his part.
Amān: Security granted by a person from any harm by others or by a
conqueror to the conquered peoples.
Amānah: It refers to deposits in trust. A person can hold a property in
trust for another, sometimes by express contract and sometimes by
implication of a contract. Amānah entails absence of liability for loss
except in breach of duty. Current Accounts are regarded as Amānah

Journal of Islamic Business and Management Vol.2 No.2, 2012 5
(trust). If the bank gets authority to use Current Accounts funds in its
business, Amānah transforms into a loan. As every loan has to be repaid,
banks are liable to repay full amount of the Current Accounts.
Amwāl: Plural of Māl, Goods.
Amwāl al-Mubāh: Commodities that are naturally available and may be
benefited from by all. For instance, water from a river or the wood from
the trees of a forest; Objects that are lawful (i.e. something which is
permissible to use or trade in).
Amwāl al-Ribwiyah: Goods subject to Fiqh rules on Riba in sales:
monetary units and items sold by weight and /or by measure, including
gold, silver, paper currencies, edible goods like wheat, rice, barley, dates,
salt, etc.
Aqar: Real estate; immovable property such as land, buildings, trees and
so forth.
Ar╔: Land.
Arbāb al-Māl: Plural of Rab al-Māl, Partners who contribute capital to
the partnership business, e.g. depositors of Islamic banks that give
deposits on the basis of Mu╔ārabah.
Arkān al-‘Aqd: Fundamental elements of a contract.
Athmān: Plural of Thaman, Monetary units or medium of exchange used
for payment of prices and liabilities.
Awqāf al-Nuq┴d: Cash waqfs.
Awqāf: Plural of Waqf: A religious foundation set up for the benefit of
the poor.
Āyah: The term refers to a passage from the Holy Qur‟an.
Bā═il: Void, invalid; refers to a transaction, a contract governing a
transaction or an element in a contract which is invalid.
Bai‘: A contract of sale / purchase; an agreement between two parties (the
seller and the buyer) to the effect that the ownership of the sale item is
transferred, alongwith related risk, from the seller to the buyer in exchange
for a price.
Bai‘ al Nasia’ bil Nasia’: Exchange of credit for credit, Bai‘ of credit for
credit; also known as Bai‘ al-‟Ajal bil-‟Ajal.

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Bai‘ al-‘Ajal bil-’Ajal: (Syn. Bai‘ al-Salam), a type of sale in which the
price is paid upon signing the contract and the delivery of goods is delayed
to a future date –forward sale, valid subject to certain conditions. OK
Bai‘ al ‘Arāya: Contract of barter in dates – sale/ exchange of fresh dates
by estimation, while they are still on the palms, with dried dates; allowed
up to 5 Wasqs at a time; in a contract of sale of dates, some trees in the
garden are donated by the owner to the needy who can get fresh fruit off
these trees in exchange for the dry ones for household consumption and
not for further sale; compare with Bai„al-Muzābanah.
Bai‘ al-‘Inah: A buy-back contract. This is a double sale by which the
borrower and the lender sell and then resell an object between them, once
for cash and then for a higher price on credit, with the net result of a loan
with interest. This transaction is prohibited according to mainstream
approach of Islamic finance.
Bai‘ al-╗arf: Sale / exchange of gold, silver or other monetary units on
both sides.
Bai‘ al-‘Arbūn: It is a sale of down payment with the condition that if the
buyer took the commodity, the down payment would become part of the
selling price and if he did not purchase the commodity, the advance
money would be forfeited. A time is fixed for finalization of the contract.
Bai‘ al-Bā═il: Invalid sale – having no effect in respect of rights and
liabilities of the parties.
Bai‘ al-Dayn: Sale of debt or debt instruments, e.g. discounting /
rediscounting of debt based securities, collatoralised debt obligations, etc.
The provision of debt based capital by way of sale/purchase of debt
instruments and papers. It is prohibited according to AAOIFI, Jeddah
based Islamic Fiqh Council and the mainstream Islamic finance theory.
Bai‘ al-Dayn bil Dayn: (See Bai„ al-Kāli bil Kāli), an exchange of debt
for debt,or sale of debt for debt, e.g. if in Salam, payment is not made by
the purchaser at the time of executaion of the contract, it becomes Bai„ al-
dayn bil dayn.
Bai‘ al-Fāsid: Sale that may exist but will be void due to defect- because
of non compliance of conditions of contract - voidable; it needs to be
cancelled or defect removed; if the defect is rectified the sale becomes
valid.

Journal of Islamic Business and Management Vol.2 No.2, 2012 7
Bai‘ al-Ghā’ib: Sale of absent / non-existent or concealed goods (without
knowing their features / specifications).
Bai‘ al-Hā╔ir li-bād: Sale by the urbanite for the nomadic, a type of
business practice in the days of the Holy Prophet (pbuh) whereby some
people worked as agents of the grain growers. These agents earned profit
both from the seller and the buyer and often deprived the rural cultivator
of his just profit and the urban buyer of a just price. The Prophet
prohibited this type of arrangement, enabling the sellers and buyers to deal
directly with one another.
Bai‘ al-Hasāt: A type of business transaction in pre-Islamic „Arabia
where the contract was concluded by the buyer by throwing pebbles
towards the merchandise, the one hit by the pebble becoming the object
sold (alternate term Bai' bi ilqā al-hajar); prohibited due to Gharar.
Bai‘ al-Isti╖nā‘: A „purchase order‟ contract where a buyer orders a seller
or contractor to manufacture or prepare an item according to specifications
given in the purchase contract to be delivered on a certain future date. The
settlement of the purchase price is according to the agreement between the
two parties.
Bai‘al-Istijrār: A contract where the supplier agrees to provide a
particular product to the client on an ongoing basis for an agreed price
based on an agreed mode of payment. It is also applied between a
wholesaler and a retailer for the supply of a number of agreed items.
Bai‘ al-Juzāf: The sale of goods that are unknown or undetermined as to
their quantity, especially foodstuffs.
Bai‘ al-Kāli bil Kāli: Sale of debt for debt, or exchange of delayed
counter value for another delayed counter value; also termed as Bai„ al-
Dayn bil Dayn; many forms: amount of debt is sold to the debtor for some
profit – a postponement or delay in the payment of a debt against an extra
payment; a type of credit sales in which on the date of the discharge of the
debt, the debtor seeks extension with the promise to pay something in
addition. A man buying a thing on credit for a certain period and when the
period of payment comes and he is unable to pay, he says to the creditor:
sell it to me on credit for a further period for something additional; on this
the creditor sells it to him. It may also refer to a man who pays money for
wheat or the like, to be given at a certain time and when the time comes
the debtor says, 'I do not have wheat, etc., but you sell your debt to me on
credit for a certain period with an increment'.

8 Journal of Islamic Business and Management Vol.2 No.2, 2012
Bai‘ al-Khiyār: Sale with an option for one party to rescind the contract
within a specified time.
Bai‘ al-Ma‘d┴m: Buying and selling something that does not exist.
Bai‘ al-Majh┴l: It refers to a sale in which the object of sale or its price or
the time of payment remains unknown and unspecified - lacking any
material information.
Bai‘ al-Mu‘allaq: Suspended sale – a sale transaction effectiveness of
which is related to any future condition or action.
Bai‘ al-Mu‘āwamah: Selling the fruits on trees for a period of 1, 2, 3 or
many years without specifying the amount and the price, also known as
Bai‘ al-Sin┘n.
Bai‘ al-Muwāsafah: Sale of goods by describing them without any
inspection and possession, the delivery being made later, after the vendor
himself had bought them; the commodity is not present - a kind of Gharar
sale.
Bai‘ al-Muzāyadah: The sale of an asset to the highest bidder in the
market; a public sale through auction in which the deal is struck with the
highest bidder. Tech: A form of sale of merchandise in which more than
one seller is interested, and the commodity is taken by the genuine highest
bidder. However, if some of the prospective customers starts bidding up
the price, before the deal is finalized, without the intention of buying, it
becomes Bai‘ al-Najash.
Bai‘ al-Najash: Bidding for an an article for more than its price, not
meaning to purchase but only to catch up the innocent buyer, see
Tanājush.
Bai‘ al-Ta‘āti (or Bai‘ Mu‘atah): Buyer picks up the goods and the seller
accepts the price without any explicit bargain. It is also termed as Bai‘ al-
Mu„atah.
Bai‘ al-Thunya: Bai‘ with any exception - of other items of the same
goods; not allowed until the purchaser knew the exempt amount.
Bai‘ as-╗ikāk: Sale through documents, to buy certain goods without
taking possession except through transferring of papers of entitlement.
Common in the early days of Islam - also prevalent in the modern times in
the futures‟ markets. Sale deals are concluded without physical possession
of goods from one party to the other; at each stage margins are added

Journal of Islamic Business and Management Vol.2 No.2, 2012 9
without adding any utility to the products. Similarly, selling only licenses
and permits issued by the government is also covered by this.
Bai‘ bil Wafa: Sale with a right for the seller, having the effect of a
condition, to repurchase the property by refunding the purchase price.
Basically a pledge; treats the sold asset as collateral till the amount is paid
back by the other party to sale. It is not permissible if the resale of the
property to the original seller is made a condition for the initial sale.
Bai‘ Bithaman al-’Ājal: This contract refers to the sale of goods on a
deferred payment basis. Equipment or goods requested by the client are
bought by the bank which subsequently sells the goods to the client on
agreed price which includes the bank‟s mark-up (profit). The client is
allowed to settle payment by installments within a pre-agreed period, or in
a lump sum. Similar to a Murābaha contract, but with payment on a
deferred basis; also known as Bai„ al Mu‟ajjal.
Bai‘ Mu’ajjal: A credit sale. Technically, a financing technique adopted
by Islamic banks that takes the form of Murābaha - Mu‟ajjal. It is a
contract in which the seller earns a profit margin on purchase price and
allows the buyer to pay the price of the commodity at a future date in a
lump sum or in installments. The price fixed for the commodity in such a
transaction can be the same as the spot price or higher or lower than the
spot price, but generally it is higher than the spot price.
Bai‘ Murābaha: A sale with bargaining on profit margin; sale based on
cost price and mutually agreed profit margin, where the cost price, the
profit margin and other costs to the seller are made known to the buyer at
the time of the contract.
Bai‘ Musāwamah: Sale without any reference to the cost price to the
seller; sale with bargaining on the price, not the profit margin as in
Murābaha.
Bai‘ ╗ahih: Valid sale. For a valid sale, the contract (‘Aqd) should have to
be drawn up with proper offer and acceptance, should fulfill all conditions
relevant to the parties to the contract, the subject matter and the definite
price (Thaman), and the possession or delivery of the item has to be given
and taken (Qab╔a).
Bai‘ al-Salam: A contract in which a seller undertakes to supply some
specific goods to the buyer at a future date in exchange of an advance
price fully paid at the time of the contract. According to normal rules of
the Sharī„ah, no sale can be effected unless the goods are in existence and

10 Journal of Islamic Business and Management Vol.2 No.2, 2012
in ownership of the seller at the time of the bargain, but Salam sale is an
exception given by the Holy Prophet (pbuh) to the general rule, provided
the goods are defined, price agreed and fully paid, and the date of delivery
is fixed. The objects of this sale are Mithly goods generally available in
the market, and cannot be gold, silver or currencies covered under rules of
Bai‘ al-╗arf, i.e. mutual exchange has to be hand to hand without delay.
Bai‘ Tawliyah: Resale at cost price – to facilitate or serve others; a kind
of Buy┴‘ al-Amān┐t (fiduciary sales).
Bai‘ wa Salaf: A conditional contract combining selling and lending, like
one says to another: I purchase your goods for such and such if you lend
me such and such - invalid.
Bai‘ al-Muzābanah: It is the exchange of fresh fruits for dry ones in a
way that the quantity of the dry fruit is actually measured and fixed but the
quantity of the fresh fruit to be given in exchange is guessed while it is
still on trees - permissible to the extent of „Arāya - see Bai„ al „Arāya.
Bai‘atyn fi Bai‘: Two sales in one. A type of transaction in which two
sales are executed that depend upon each other, explicitly prohibited by
the Holy Prophet (pbuh); The meaning of the expression "two sales in
one" is explained by the Fuqah┐ in various ways. Also called "Safaqat┘n fi
Safaqah."
Baīt ul-Māl: The treasury of the Islamic State / Muslim Community;
historically, the Baīt al-M┐l as an institution that was developed by the
early Pious Caliphs but which soon fell into disrepair. The funds contained
in the Baīt al-M┐l were meant to be spent on the needs o the ‟Ummah e. g.
supporting the needy.
Banca Takāful: Takāful marketing through Islamic banks; banks
providing both services of banking as also Takāful.
Barnāmaj: Catalogue or list of contents in a sale consignment.
Buy┴‘al-Amānāt: Fiduciary sales like Murābaha, Tawliyah, and Wa╔i‘ah.
Buy-back: The same as Bai‘ „Inah, a prohibited type of sale in which one
(lender) sells an item on credit then buys it back for a lesser price paying
cash.
Commodity Murābaha: It is basically Tawarruq or reverse Tawarruq
conducted by Islamic banks; a transaction where the Islamic bank

Journal of Islamic Business and Management Vol.2 No.2, 2012 11
purchases a commodity through brokers on spot and sells it for a deferred
payment also through brokers for the purpose of getting liquidity. Islamic
banks have been using it for liquidity management by involving brokers.
As real trade does not take place, it was declared in 2009 as invalid by the
Jeddah and Makkah based Islamic Fiqh councils.
╕amān: (compare Amānah) Contract of guarantee or responsibility of
entrepreneur/manager of a business; one of two basic relationships toward
property, entailing bearing the risk of its loss.
╕amān ( Kafālah al Dayn): A contract of guarantee where a person
underwrites any claims or obligations that should be fulfilled by a debtor
in the event that the debtor contractor fails to fulfill his obligation; any
third party become surety for the payment of debt. It is a covenant / pledge
given to a creditor that the debtor will pay the debt or any other liability.
╕amān Kha═r al-║ar┘q: An arrangement of mutual assistance in which
losses suffered by traders during journey due to hazards on trade routes
were indemnified from jointly pooled funds.
╕ar┴ra: Compulsory, necessity, a dire need.
Dal┘l: Evidence, indicative legal text.
Dayn: A liability owed to someone; Dayn comes into existence as a result
of any other contract or credit transaction. It is incurred either by way of
rent or sale / purchase or in any other way which leaves it as a debt to
another. Duy┴n (debts) ought to be returned without any profit since they
are covered uinder Riba, prohibited by the Sharī„ah. Dayn, unlike Qar╔,
cannot be demanded / redeemed prior to its due date. Hence, all Qur┴╔ are
Dayn, but not the vice-versa; also, a category of Māl.
Dhimmah: Dhimmah is a basic term in Fiqh al-Mu„āmalāt 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 Fuqah┐ also
speak about a person's Dhimmah "being occupied " and "being cleared."
Diminishing Mushārakah: (see Shirkat al-Mutanāqi╖ah).
Dinar: Currency in the form of gold coins used by Muslims throughout
Islamic history. The standard mass of the dinar which is referred to in Fiqh
is 1 Mithqāl (app. 4.25 grams.)

12 Journal of Islamic Business and Management Vol.2 No.2, 2012
Dirham: Currency in the form of silver coins used in the past in several
Muslim countries, and still used as a legal tende in some Muslim
countries, such as Morocco and United „Arab Emirates.
Diyah: Compensation for harm inflicted or a return paid for a favour.
Esham: Plural of sehm meaning share, Ottoman institution of Riba free
domestic borrowing.
Fairness: Decision free from biasness & injustice, to treat all sides alike.
Falāh: Fal┐h means to thrive, to become happy or to have luck and
success. Technically it implies success both in this world and in the
Akhirah (Hereafter). The Fal┐h presumes belief in one God, the
apostlehood of Prophet Muhammad (pbuh), Akhirah and conformity to the
Sharī„ah in behaviour.
Faqih: Muslim jurist; A Muslim who is an expert in jurisprudence; a
Muslim who is knowledgeable of the rules of the Sharī„ah and knows how
these rules are related to the source texts upon which they are based.
Faq┘r: Plural Fuqarā’, A needy/poor person who is unable to make his
both hands meet.
Fāsid: A voidable or defective contract (according to division of contracts
with respect to legality). A contract that is legal in its A╖l, i.e. it has all
elements of the contract, but is not legal in its Wa╖f, i.e. with respect to
external or non essential attributes of the contract, it will not be
necessarily void, rather it will be voidable – Fāsid, which can be
regularized or validated by removing the cause of irregularity.
Faskh: Undoing, dissolving, cancellation. Faskh is a term used by the
classical Fuqah┐ to refer to the dissolution of a contract or agreement, such
that affairs return to the state in which they were before the closing of the
contract, without any addtition or subtraction. Many of the classical
Fuqah┐ apply the term Faskh to instances in which a previously valid
(╗ahih) contract is cancelled voluntarily by the contractual parties - such as
in Iqālah, Khiyār al-„Ayb (option to return in case of a defect) and Khiyār
al-Shar═ (stipulated option of return during an agreed period) - and use the
term Infisākh 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

Journal of Islamic Business and Management Vol.2 No.2, 2012 13
purchaser or the dissolution of certain partnerships upon the death of one
of the participating parties.
Fatwa: Plural Fatāwa, An opinion, ruling or pronouncement on Islamic
law issued by an Islamic scholar or Sharī„ah Supervisory Board. Fatwa is
an authoritative juristic judgment based on the Sharī„ah tenets.
Fiqh: Means understanding / human comprehension of the divine law
(Sharī„ah); Islamic jurisprudence; the science of the Sharī„ah. Different
schools of Fiqh developed over time within Islam, and these schools often
have varying views on whether a particular action is permitted under
Sharī„ah. Study and application of these views implies study of Fiqh. It is
an important source of Islamic business and finance.
Fiqh al-Mu‘āmalāt: Islamic commercial jurisprudence, or the rules of
transacting in a Sharī„ah compliant manner.
Frāi╔: Obligations – acts that are obligatory for Muslims; Also, a
technical term for inheritance distribution as per Sharī„ah principles – „Ilm
al-Frāi╔.
Fu╔ul┘ Transaction: A transaction with another's property without
Sharī„ah consent. For instance, selling property before contracting an
agency agreement with its owner is a “Fu╔ul┘” transaction.
Fu╔ul┘: A person who is neither guardian, nor agent, but does any action
on behalf of other; or if he is agent, he transgresses the limits prescribed
by the principal in respect of a contract.
Fulus: Coins of inferior metal.
Fungible Goods: (See also Mithli), goods that are similar to one another
and are sold as units, generally available in the market; any difference
between them is considered negligible. One can buy any of its units
anytime in the market.
Fuqahā: Plural of Faqih, qualified specialists in Fiqh, or jurists.
Ghaban: Misappropriation or defrauding others in respect of
specifications of the goods and their prices.
Ghaban al-Fāhish: Excessive profiteering with deception - a person sells
a commodity telling explicitly or giving impression that he is charging the
market price, but actually he is charging exorbitant price taking benefit of
ignorance of the purchaser – in such cases purchaser has option to revoke
the sale and get back the price paid (See Khiyār al-Ghaban).

14 Journal of Islamic Business and Management Vol.2 No.2, 2012
Ghanimah: War booty.
Gharar: It means any element of absolute or excessive uncertainty in any
transaction or a contract about the subject matter of a contract or its price;
or mere speculative risk, like injecting the risk while initiating or
executing a transaction. It leads to undue loss to a party and unjustified
enrichment of other, which is prohibited.
Ghārim: Plural Ghārimun, A debtor who does not possess the funds with
which to repay the debt. Also, a person who has to pay others‟ debts being
guarantor, in case the original debtor does not pay. The Shafi„i and M┐liki
jurists divide the Ghārimun into two types: a) those whose debts were
incurred in their own benefit and b) those whose debts were incurred
benefiting others. According to the Hanafi jurists, a Ghārim is one whose
funds, after repayment of his debt, would not equal the Nisāb of Zakah.
The Ghārimun are one of the eight groups mentioned in the Qur‟an as
potential recipients of Zakah funds.
Ghārimun: (plural of Ghārim), Broadly, those who are obliged to pay
others‟ debts as sureties; One head of the Zakat beneficiaries. Islamic state
can make up their loss by paying from Zakat proceeds.
Gha╖b: The wrongful appropriation of property by force.
Ghā╖ib: Usurper of property of others.
Ghish: Cheating, fraud, deception. Both are prohibited by the Sharī„ah.
Habal al-Hablah: A type of sale practiced by the „Arabs during the
Jāhil┘yyah, 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-Hablah transaction was prohibited by the Holy Prophet (pbuh) due to
involvement of Gharar, with regard to the subject matter 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. Same is the case of financial derivatives in vogue, i.e.
Gharar is injected knowingly in the very beginning.
Habs: To keep, to restrict someone or some asset.
Hadith: Plural Ahādith, A successively transmitted report of an utterance,
deed, affirmation or characteristic of the Holy Prophet Muhammad (pbuh).
The Ahādith are the source texts by which the Sunnah is preserved.

Journal of Islamic Business and Management Vol.2 No.2, 2012 15
Hajj: Hajj means pilgrimage to Makkah and other Holy places in Hijaz,
Saudi „Arabia. Hajj, the fifth pillar of Islam, is a duty on every Muslim
who is financially and physically able to carry it out, at least once in his
lifetime. There is a specific period for Hajj, namely one week from the 8th
day of the Islamic month of Dhul Hijjah to the 13
th
day of that month in
the Islamic lunar calendar.
Halāl: Anything permitted by the Sharī„ah. In Islamic view there are
items, activities, professions, contracts and transactions which are
explicitly prohibited (Harām) by the Qur‟an and /or the Sunnah. Barring
them, all other activities, professions, contracts, and transactions etc. are
Hal┐l. This is one of the distinctive features of the Islamic economics vis-
a-vis the Western economics where no such concept exists - all activities
are judged on the touchstone of economic utility. In Islamic economics,
other factors, mostly religious and moral, are also involved. An activity
may be (apparently) sound but may not be allowed in the Islamic society if
it is not permitted by the Sharī„ah.
Hāmish Jiddiyah: The Islamic financial term for a sum of earnest money
received by banks from the client as security that serves as compensation
in the event the potential buyer or the lessee backs out from entering into a
sale or an Ijārah contract (after the bank has purchased the asset as
required by him). The bank recovers the actual loss from it and returns the
remainder to the client.
Haq: Truth, right. Al-Haq, the Truth, is one of the names of Allah (swt).
In the Fiqh of financial transactions, the term Haq signifies a right which a
party possesses, for example the creditor‟s right to payment.
Haq Dayn: Debt rights.
Haq Māli: Rights over financial assets.
Haq Tamalluk: Ownership rights.
Harām: Anything prohibited by the Sharī„ah; compare Halāl.
Hawalāh: It means transfer; legally, it is an agreement by which a debtor
is freed from a debt by another becoming responsible for it; or the transfer
of a claim of a debt by shifting the responsibility from one person to
another – contract of assignment of debt. It also refers to the document by
which the transfer takes place.
Hawl: The term Hawl is used by the jurists to describe the period of time
which must pass before a Muslim in possession of funds equaling or
exceeding the exemption limit (Nisāb) must pay Zakah on his wealth. In

16 Journal of Islamic Business and Management Vol.2 No.2, 2012
the case of cash, gold and silver it is one Islamic year i.e. a lunar year of
app. 354 days.
Hibah: Hibah means gift, an act of transferring of ownership of an asset
or usufruct without an exchange of counter value during the lifetime of the
transferor.
Hif╘ al-‘Aql: Protection of the intellect; the right of minimum level of
knowledge and education.
Hif╘ al-D┘n: Right pertaining to protection of religion / religious rights.
Hif╘ al-Māl: Right pertaining to protection of property.
Hif╘ al-Nafs: Right pertaining to protection of life.
Hif╘ al-Nasl: Right pertaining to protection of progeny - the future
generations.
Hijrah: The migration of the Holy Prophet and his followers from
Makkah to Madinah.
H┘lah: Plural Hiyal, ruses, tricks used in transactions to circumvent the
basic prohibitions.
Hisa (Bai‘): A type of sale practiced by the „Arabs in the Jāhil┘yyah and
prohibited by the Holy Prophet (pbuh) in which the sale was determined
by the casting of pebbles. Classical commentators mention three forms of
the Hisa sale: 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."
Hisbah: Hisbah is a term used by the classical jurists 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.
Hissas: Means equity shares or ownership interests.

Journal of Islamic Business and Management Vol.2 No.2, 2012 17
Homogeneous Commodities (Mithli goods): Commodities that are
similar to one another; the difference between them, if any, is negligible.
Hukm: Plural Ahkām, In Fiqh, the Sharī„ah ruling (e. g. obligatory,
recommendable, neutral, reprehensible, or forbidden) associated with any
action.
Hukmi (Qab╔a): Constructive possession; a situation in which the buyer
has not taken the physical delivery of the commodity, yet the commodity
has come into his risk and control and all the rights and liabilities are
passed on to him, including the risk in case of its destruction.
Huqooq: Plural of Haq, rights.
Husn al-Ada / Qa╔a: Gracious payment of loan / debt: Repaying a loan in
excess of the principal without a pre-condition; Individuals‟ discretion; not
to be adopted as a system in which case a creditor, lender or an investor
may have an expectation of getting some reward on the debt.
‘Ibādāt: Plural of Ibādah, meaning worship or a ritual act.
‘Illah: It is the attribute of an event or a contract that entails a particular
Divine ruling in all cases possessing that attribute. „Illah is the basis for
applying analogy for determining permissibility or otherwise of any act or
transaction.
‘Inah: (See also Bai„ al-„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, with the net result of a loan with interest.
‘Inān: (A type of Shrikah), it is a form of partnership in which each
partner contributes capital, not necessarily equally, and has a right to work
for the business.
‘Iwa╔: Recompense or equivalent counter-value in an exchange – price,
wage, fee or rental.
Ibāha al-A╖l┘yah: General permissibility which means that all economic
activities that are not prohibited by the original sources of Sharī´ah, i. e.
Qur‟an and Sunnah are valid / permissible.
Ibrā’: Giving up of a right. In Shirkah or any commercial transaction a
partner or creditor gives up part or all of his / her right to other partner / a
debtor, allowed subject to some conditions in relevant areas.

18 Journal of Islamic Business and Management Vol.2 No.2, 2012
Ihtikār: Hoarding; the prohibited practice of purchasing essential
commodities, when not available in the market in bulk, such as food, and
storing them in anticipation of an increase in price.
Ijāb: Offer, in a contract; see also Qab┴l.
Ijārah: Leasing; sale of defined usufruct of any asset for a defined period
in exchange of definite rent; only such assets can be leased corpus of
which is not consumed with use or form / shape of which is not entirely
changed with use. For example, cotton, yarn, fuel, milk, money can be
sold / bought, not leased against rentals. This is because the lessor has to
bear the risk related to the ownership of asset, and it is possible only if the
leased asset remains intact and the lessor gets reward in the form of rental
against taking risk.
Ijārah Mosufah bil ╕immah: A lease contract where the lessor
undertakes to provide a well defined service or benefit without identifying
any particular units of asset rendering the related service. If a unit of the
asset is destroyed, the contract is not terminated and the lessor provides
another such unit.
Ijārah Muntahia bi Taml┘k: Lease culminating into transfer of
ownership to the lessee in such a way that lease and sale contracts are kept
separate and independent transactions. Use of this term for Islamic leasing
is better than Ijārah wa-Iqtinā„ as the latter tends to give impression that
Ijārah and sale are working side by side without observing the relevant
rules, while actually they have to be two separate deals Ijārah as adopted
in AAOIFI‟s Sharī„ah Standard.
Ijārah ╗ukuk: Certificates representing the ownership of leased assets,
the ownership of the usufruct of leased assets or the ownership of the
rights to receive benefits from services.
Ijārah Thumma Bai‘: Refers to an Ijārah (leasing/renting) contract to be
followed by a Bai„ contract. Under the first contract, the hirer leases the
property from the owner at an agreed rental over a specified period. Upon
expiry of the leasing period, the hirer enters into a second contract to
purchase the property from the owner at an agreed price; almost identical
with term Ijārah Muntahia bi Taml┘k.
Ijārah tul ‘Amal: A contract for providing services for an agreed upon
fee, wage.
Ijārah tul Ashkhā╖: (Syn. Ijārah tul ‘Amal), a contract for providing

Journal of Islamic Business and Management Vol.2 No.2, 2012 19
services for an agreed upon fee, wage.
Ijārah tul Manf‘ah: A contract of lease executed for the transfer of the
benefits of an asset in exchange for an agreed upon price.
Ijārah wa-Iqtinā‘: A mode of financing, by way of Hire-purchase. It is a
contract under which a bank may finance equipment, building or other
facilities for the client against an agreed rental together with a unilateral
undertaking by the bank or the client that at the end of the lease period, the
ownership in the asset would be transferred to the lessee. The undertaking
or the promise does not become an integral part of the lease contract to
make it conditional. It is Sharī„ah compliant provided the lease and the
sale contracts are separate and independent of each other.
Ijmā‘: Consensus of all or majority of the leading qualified jurists of on a
certain Sharī„ah matter in a certain age.
Ijtihād: It refers to an endeavor of a qualified jurist to derive or formulate
a rule of law to determine the true ruling of the divine law in a matter on
which the revelation is not explicit or certain, on the basis of Na╖╖ or
evidence found in the Holy Qur‟an and the Sunnah. Express injunctions
have no room for Ijtihād. Implied injunctions can be interpreted in
different ways by way of inference from the accepted principles of the
Sharī„ah.
Ikhtilāf: Divergence of opinions among jurists.
Iktināz: Hoarding wealth by not paying Zakah on it.
Iltizām: Ottoman tax based farming system.
Imām: Leader, guide or ruler.
Imān: Faith or belief; the acceptance and affirmation of Oneness of
Allah, His Books, His Messengers, His Angels, the Hereafter and Divine
Decree.
Imtiyazāt: Privileges/protection granted by Ottoman State to foreign/non-
Muslim merchants.
Infisākh: (See also Faskh), contract cancellation without the will of the
contracting parties, i.e. as a result of an asset‟s destruction or the death of
a party to the contract.
Iqtā’ al-Qabala: A land grant for the payment of a fixed amount tax.
Iqtā’: Assignment of land as private property.

20 Journal of Islamic Business and Management Vol.2 No.2, 2012
Iqti╖ād: Moderation, the term is used in modern standard „Arabic to
denote the field of economics.
Islāh: Reform.
Islām: (Lit. submission to Allah), The religion prescribed by Allah (swt)
i.e. the worship of Allah alone in the way as guided by His Prophet
Muhammad (pbuh). Islam is (1) Shahadah i. e. testifying that there is no
God but Allah and that Muhammad is the Messenger of Allah (swt), (2)
establishing ╗alah i. e. prescribed prayer, (3) paying Zakah i. e. giving a
portion of one's wealth to the needy, (4) the ╗awm of Rama╔an i. e. fasting
during the 9th month of the Islamic calendar and (5) Hajj i. e. making
pilgrimage to the sacred precincts of Makkah in „Arabia once in a lifetime
if one is able. A person whose religion is Islam is a Muslim. One becomes
Muslim by declaring the Shahadah i.e. "Ash-hadu al lā ilāha illallaah wa
ash-hadu anna Muhammadan Abdoh┴ wa Rasuloh┴" ("I tesify that there is
nothing rightfully worshipped except Allah and I testify that Muhammad
is the ‘Abd and Messenger of Allah").
Isrāf: (See also Tabz┘r), It refers to immoderateness, exaggeration and
waste and covers spending on lawful objects but exceeding moderation in
quantity or quality; spending on superfluous objects while necessities are
unmet; spending on objects which are incompatible with the economic
standard of the majority of the population.
Isti╖n┐‘: Order to manufacture (for purchase): It is a contractual agreement
for manufacturing goods and commodities, allowing cash payment in
advance and future delivery or a future payment and future delivery.
Isti╖n┐‘ can be used for providing the facility of financing the manufacture
/ construction of houses, plants, projects, bridges, roads and highways.
Isti╖n┐‘ ╗ukuk: Certificates representing proportionate ownership of
goods manufactured under Isti╖nā„ arrangement.
Istibdāl: Exchanging one thing with another, e.g. the original Waqf
property with another.
Istihlāk: Consumption.
Istihsān: It is a doctrine of Islamic law that allows exception to strict legal
reasoning, or guiding choice among possible legal outcomes, provided the
same is not against the basic texts of Qur‟an and Sunnah, when
considerations of human welfare so demand.

Journal of Islamic Business and Management Vol.2 No.2, 2012 21
Istijrār: Repeat sale / a continues purchase or supply contract - An
agreement between the buyer and the supplier, whereby the latter agrees to
supply a particular product on an on going basis, for example monthly, at
an agreed price and on the basis of an agreed mode of payment.
Ittifaq Dhimni: An agreement between parties concerned on the sale
price and repurchase price of an asset prior to the execution of the sale and
repurchase contracts for the purpose of bidding process in Bai„
Muzāyadah (bidding or auction).
Jadwala: Rescheduling a payment plan.
Jāhil┘yyah: (Exp. Ayy┐m al-Jāhil┘yyah), the days of ignorance, the so-
called "pre-Islamic period." Jāhil┘yyah is the term Muslims use to refer to
the era just before the coming of the Prophet Muhammad (pbuh) 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.
Jahl or Jahāla: Ignorance, lack of knowledge; indefiniteness in a
contract, sometime leading to Gharar.
Jizya: Poll tax.
Ju‘alāh or Ji‘ālah: Ju„alah is rendering a service against reward;
Literally, it constitutes wage, pay, stipend or reward for a random job.
Legally, it refers to doing any job or providing any service for achieving
an objective which is not sure to be achieved for some one against prize,
fee or commission. Achievement of the end result is necessary for
entitlement to fee or prize. The determination of the required / end result
of the transaction is considered to be sufficient to make it permissible.
Ju‟al┐h is relevant and useful transaction in events that cannot be
accomplished through Ijārah, such as bringing back a lost property from
uncertain location because Ijārah contract requires that the work as also
the wage must be specified without any hazard.
Ju‘ālal: (A term like Ju‘al in Ju‘alāh), Stipulated price for performing any
service. Bank charges and commission have been interpreted to be Ju„al
by the jurists and thus considered lawful. Some Islamic banks give loans
with service charge. It is permitted to charge a fee for loan related service
offered by an Islamic bank. However, this fee should base on the actual
expenditures and any fee in excess to actual service related expenses is
forbidden because it is considered Riba. The service charge may be
calculated accurately only after a certain period when all administrative

22 Journal of Islamic Business and Management Vol.2 No.2, 2012
expenditure has already been incurred e.g. at the end of the year. Hence, it
is permissible to levy an approximate charge on the client, then, reimburse
or claim the difference at the end of the accounting period when actual
expenses on administration become precisely known.
Kafālah: Suretyship, Kafālah means responsibility, amenability or
suretyship; legally, in Kafālah a third party become surety for the payment
of debt. It is a pledge given to a creditor that the debtor will pay the debt,
fine etc.
Kaf┘l: The party assuming responsibility in a Kafālah contract for
repayment of another‟s debt.
Kāli bil Kāli: See Bai„ al-Kāli bil Kāli.
Kalimah: A statement every Muslim must make to the effect that „There
is no god but Allah and that the Prophet Muhammad (pbuh) is His
messenger‟; a non-Muslim converts to Islam by making this statement.
Kharāj: The share of the produce from agricultural lands collected by
Muslim rulers and added to the Baīt al-M┐l; also, return or income on
investment – compare ╕amān.
Kha═ar: A kind of Gharar - Kha═ar will be involved if liability of any of
the parties to a contract is uncertain or contingent; delivery of one of the
exchange items is not in the control of any party and the payment from
one side is uncertain.
Khilābah or Khal┐bah: A form of fraud, either in words or deed by a
party to a trading contract with the intention of inducing the other party to
make a contract; marketing to mislead - pursuing unaware and simple
clients by over-projecting the quality of a commodity.
Khiyānah: A breach of trust, betrayal or treachery.
Khiyār: Option or a power to annul or cancel a contract.
Khiyār al-‘Aib: Option of defect – goods can be returned if found
defective – option automatically available to the buyer.
Khiyār al-Ghaban: Option related to price. Where the seller sells the
goods telling explicitly or giving the impression that he is charging the
market price; but actually it is far more than the market price; a kind of
cheating, so the buyer has right to revoke the contract and get back the
price.

Journal of Islamic Business and Management Vol.2 No.2, 2012 23
Khiyār al-Majlis: Option of the contracting session; the power to annul a
contract possessed by both contracting parties as long as they do not
separate.
Khiyār al-Naqd: Option of payment – to agree that if payment is not
made within (3) days, the contract will be annulled- in spot sale with a
grace period, after passing of which the contract would be cancelled or
price or the rate might have to be re-stipulated.
Khiyār al-Ro’yat: Option to revoke a sale contract to be exercised on
seeing the goods.
Khiyār al-Shar═: A right, stipulated by one or both of the parties to a
contract, to cancel the contract for any reason for a fixed period of time,
e.g. three days.
Khiyār al-Ta‘een: The purchaser‟s option to return an asset to the seller
in case it does not meet specifications as established at the time of contract
execution.
Khiyār al-Wa╖f: Option of quality – where goods are sold by specified
quality, if that quality is absent, the goods can be returned.
Luqta: An item / asset misplaced by its owner and found by someone
else.
Ma‘l┴m: Known- in the knowledge of the parties.
Ma╖lahah or Ma╖laha al-Mursalah: The aspect of general welfare /
benefit of mankind / society that is kept in view by the scholars competent
to undertake Ijtihād while resolving issues confronting time to time.
Catering to the well-being of the people in the worldly life as also in the
Hereafter or relieving them of hardships is the basic objective of the
Sharī´ah.
Mabi‘: Subject of the sale contract - the commodity that is being traded in
a transaction.
Madhhab: Pulral Madhāhib - way of going; a Fiqh school or orientation
characterized by differences in the methods by which certain source-texts
are understood and therefore differences in the Sharī„ah rulings which are
deduced from them. There are four well-known Madhāhib among Sunni
Muslims whose names are associated with the classical jurists who are
said to have founded them (Hanafi, Maliki, Shafi„i and Hanbali).

24 Journal of Islamic Business and Management Vol.2 No.2, 2012
Maisir: An ancient ‘Arabian game of chance played with arrows without
heads and feathering for stakes of slaughtered and quartered camels. It
came to be identified with all types of hazard and gambling and refers to
acquisition of wealth by chance / easily (without paying an equivalent
compensation („Iwa╔) for it.
Makr┴h: Detested; technical term used by the Fuqahā to classify actions
with regard to their desirability. Makr┴h in Sharī„ah issues is said of an
action which one is rewarded for avoiding, but not punished for
committing.
Māl: Any thing that can be possessed; includes money such as gold, silver
and monetary units, commodities such as clothes and foodstuffs, and
immovable properties such as houses and factories, or any established
rights.
Māl al-Mutaqawam: Items that are lawful to use or consume in Sharī„ah;
or wealth considered commercially valuable by Sharī„ah. Legal tenders of
modern age that carry monetary value are included in Mal al-Mutaqawam.
It is possible that certain wealth has no commercial value for Muslims
(non-Mutaqawam) but is valuable for non-Muslims. Examples are wine
and pork.
Manfa‘ah (Benefit): The yield which any utilizable property produces.
The term is often used by the Fuqahā 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 or may derive from the use of the vehicle
for the duration of the lease (as opposed to the actual ownership of the
vehicle).
Maqā╖id al-Sharī‘ah: (The objectives of the Sharī„ah). The term Maqā╖id
al-Sharī„ah refers to a juristic-philosophical concept developed by the
classical jurists, who attempted to formulate the goals and purposes of the
Sharī„ah in a comprehensive manner to aid in the process of investigating
new cases and organizing previous existing rulings.
Masn┴‘: Means the item which is manufactured or constructed pursuant to
an Isti╖n┐‘ arrangement or contract.
Mawālāt: A contract in the ancient „Arab in which one party agreed to
bequeath his property to the other on the understanding that the benefactor
would pay any blood money that may eventually be due by the former.

Journal of Islamic Business and Management Vol.2 No.2, 2012 25
Mawq┴f: A contract effectiveness of which is suspended till any
happening.
Mazlama: Injustice, usurpation.
Misk┘n: A poor, indigent person. The Miskin is mentioned in the Qur‟an
as one of the eight recipients of Zakah.
Mithāq: A covenant; refers to an earnest and firm determination on the
part of the concerned parties to fulfill the contractual obligations; has more
sanctity than the ordinary contracts.
Mithli: (See also Fungible goods), goods that are similar to one another
and can be exchanged in kind, i.e. gold for gold, silver for silver, Euro for
Euro, wheat for wheat, etc; goods generally available in the market; any
difference between them is considered negligible. One can buy any of its
units anytime in the market. Salam can be contacted only in Mithly goods.
Mithlam bi-Mithlin: Like for like or equal for equal (in exchange
transactions)
Mu‘āmalah: A financial transaction. Fiqh al-Mu„āmalāt is the traditional
Islamic discipline concerned with the jurisprudence of financial
transactions.
Mu‘āmalāt: All kinds of economic activities related to exchange of
goods and services.
Mu’jir: The contacting party who gives his asset on lease (lessor).
Mu╔ārabah (Trust Financing): A form of joint business where one party
provides the funds while the other provides expertise and management.
The latter is referred to as the Mu╔ārib. Any profits accrued are shared
between the two parties on a pre-agreed basis, while loss is borne by the
provider of the capital. Islamic banks may act as managing trustee
(Mu╔ārib) while depositors are the beneficial owner (Rab al-Māl). It is
bank‟s responsibility to invest the funds provided by the depositors.
Alternatively, an entrepreneur would be a managing trustee, responsible
for investing the funds provided by the bank on Mu╔ārabah basis.
Mu╔ārib: Means the manager in a Mu╔ārabah based business who
manages the business and gets a share in the realised profit, if any, as per
pre-agreed ratio.

26 Journal of Islamic Business and Management Vol.2 No.2, 2012
Mu╔ārabah al-Muqayya╔ah: (Restricted Mu╔ārabah), The Rab ul-M┐l
may specify a particular business for the Mu╔ārib, in which case the latter
shall invest the money in that particular business only.
Mu╔ārabah al-Mutlaqah ( Unrestricted Mu╔ārabah): The Rab ul-M┐l
leaves it open for the Mu╔ārib to undertake whatever business he wishes,
and the Mu╔ārib is authorized to invest the money in any business he
deems fit.
Mu╔ārabah ╗ukuk: Certificates representing the proportionate ownership
of capital for specific projects undertaken by an entrepreneur by using the
funds raised through issuing the ╗ukuk. ╗ukuk that represent projects or
activities managed on Mu╔ārabah principle by appointing any of the
partners or any other person as Mu╔ārib for management of the business.
Musta╖ni: Means the purchaser under an Isti╖n┐‘ arrangement.
Muā‘awamah: Sale for years – e.g. fruits of a tree or an orchard sold for
more than one year, without stipulating amount, price and time of delivery
– prohibited.
Mubāh: Object that is lawful (i.e. something which is permissible to use
or trade in).
Mubāra’at: An agreement between the institution offering Islamic
financial services and its customer whereby the customer waives a certain
portion of his profits earned during the investment period.
Muflis: Destitute; insolvent/bankrupt debtors.
Muft┘: A highly qualified jurisconsult who issues Fatāwa (singular Fatwa,
informed legal pronouncements), usually in response to questions posed to
him.
Mughārasa: An agricultural contract similar to Muzāra‟ah in which a
land owner agrees to grant the farmer a share from the fruit or product of
the garden / orchard that the latter plants and waters.
Mujtahid: Legal expert, or a jurist who expends great effort in deriving a
legal opinion or interpreting the sources of the law.
Muhāqalah: A deal involving lease of land against corn or buying of a
crop still in growth when grains are in the ears, in exchange for corn.
Mukhābarah: Different meaning according to the context: according to

Journal of Islamic Business and Management Vol.2 No.2, 2012 27
the Companion Jābir (ra) it is a technique in which waste/uncultivated
land was given by a person to another who made an investment in it and
then shared in the process of his land; Also, an agreement between a
landowner and a farmer, similar to a Muzāra‟ah the only difference being
that in a Muzāra‟ah the seeds are provided by the landowner whereas in a
Mukh┐barah they are supplied by the farmer. (explanation of ra or similar
abbreviations has to be given)
Mulām┐sah: Sale by touching the subject matter or its carton without
knowing its detail - A form of sales contract prevalent in the days of the
Holy Prophet (pbuh) in which the buyer or the seller used to touch a piece
of cloth and this very act of touching finalized the sales deal.
Munābadhah: A contract of sale prevalent in the days of the Holy
Prophet (pbuh) in which the seller or the buyer would throw a piece of
cloth towards the other and this very act of throwing finalized the sales
deal.
Muqāssah: Setting off two debts at an agreed exchange rate, or the
payables by the parties in financial derivatives (instead of taking or
making delivery of the subject matter / price as per the contract).
Murābaha: It means a sale on mutually agreed profit. Technically, it is a
contract of sale in which the seller declares his cost and the profit. The
contract is made on the known cost and the profit margin agreed between
the parties. This has been adopted by Islamic banks as a mode of
financing. As a financing technique, it can involve a request by the client
to the bank to purchase a certain item for him. The bank does that for a
definite profit over the cost which is stipulated in advance.
Murābaha Facility Agreement: An agreement including the approval of
the credit facility by way of Murābaha extended to the client, detailing the
terms and the conditions of the contract, the specification of the Murābaha
asset and the client‟s promise to purchase.
Murābaha lil ’Amri bil Shira: Murābaha to purchase orderer- banking
Murābaha in which banks purchase from the market for sale to the client
who gave the order. AAOIFI‟s standard on Murābaha is of this category.
Murābaha Mu’ajjal: A Murābaha transaction in which the sale price is
agreed to be repaid at a future date or in installments over an agreed period
of time.
Musāqāh/Musāqāt: A partnership whereby the owner of an orchard
agrees to share the produce with the farmer as a recompense for the farmer

28 Journal of Islamic Business and Management Vol.2 No.2, 2012
tending the land and watering.
Musāwamah: Musāwamah 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.
Mushārakah: Partnership; Islamic financing technique that refers to a
partnership between two parties, who both provide capital towards the
financing of a project and both may take part in management of the
business. Both parties share profits on a pre- agreed ratio, but losses are
shared on the basis of ratio of capital provided.
Mushārakah Mutan┐qi╖a: Diminishing Mushārakah; a kind of
partnership in which share of one party decreases periodically / gradually.
The bank‟s share of equity is reduced each month, quarter or year through
partial purchase by the other partner – the client, in other words, by return
of the capital by him.
Mushārik: A partner in a Mushārakah or any Shirkah business.
Muslam Fihi: The purchased commodity in a Salam contract.
Muslam ’Ilaihi: The seller in Salam, who receives the price in advance
and has to deliver the agreed goods at agreed time in future.
Mustā’jir: One who requires expertise or labour (in Ijārah tul-Ashkha╖);
Or the person who takes an asset on lease (the lessee), in lease of assets.
Mustar╖al: An unknowing entrant into the market – not aware of the
market.
Mutawall┘: Trustee of the Waqf.
Mutawwif: Specially trained Imams who help pilgrims during the
pilgrimage.
Muw┐‘ada / Mu‘┐hida: A bilateral promise.
Mu’wakkil: The principal in an agency agreement.
Muzara’ah: Share-cropping; an agreement between two parties in which
one provides agricultural land to be used by the other in return for a share
of the produce of the land.
Na╖╖: Clear texts of the Sharī´ah, i.e. Qur‟an and Sunnah.
Najash: The prohibited practice of deceiving and inciting a potential
buyer during the course of pre-sale negotiations or bidding by egging him

Journal of Islamic Business and Management Vol.2 No.2, 2012 29
on, either through insincere bidding on the part of a spectator, 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).
Nawāhi: Prohibitions – acts prohibited by Islam.
Nisāb: The exemption limit for paying Zakat. A Muslim possessing
wealth below the Nisāb is exempt from Zakat whereas a Muslim with
wealth at or exceeding the Nisāb is obligated to pay Zakat.
Niyyah: Intent or intention while doing a job or action.
Offer and Acceptance: The actual execution of a sale, where one of the
contracting parties makes an offer to sell or purchase an asset and the
other accepts it and thus the contract is executed.
Parallel Isti╖na‘: It is the second Isti╖n┐‘ contract entered into by the bank
with the subcontractor in order to fulfill its contractual obligations in the
first (main) Isti╖n┐‘ contract.
Parallel Salam: A Salam contract by which a Rab us-Salam sells the
Muslam Fihi to any third party as a parallel contract. The two contracts
have to be kept independent of each other. In the first one, the bank is the
buyer and in the second one, the bank is the seller.
Perpetual Mushārakah: A perpetual partnership in which the period of
partnership contract is not specified, as in the case of shares of joint stock
companies. Investors participate in the equity of a company by purchasing
shares / stocks and get a share in the profit; a partner can exit by way of
transfer of his share to any other.
Pledge: A form of security that is taken from the client and maintained by
the financial institution. It may be in the form of an asset or cash.
Possession: The ownership of all the risks and rewards associated with an
asset.
Profit and Loss Sharing (PLS): The term is used to describe any one of
the deposit taking and financial schemes based on the principle of
Mu╔ārabah or Mushārakah.
Promise: An undertaking by one party to enter into a contract with the
other e.g. financial institution for the sale or lease of an asset in the future
or to do any other job desired by the other party.

30 Journal of Islamic Business and Management Vol.2 No.2, 2012
Qab╔ (seizing): Taking possession of the exchange commodity / items in
an exchange transaction, such as the exchanger taking possession of the
silver which he traded for his own gold. Its being immediate is a necessary
condition for the validity of currency exchange.
Qab╔a: (lit. to seize) Take possession of the exchange commodity in an
exchange transaction.
Qab┴l: Acceptance, in a contract; see also Ijāb.
Qabāla: Egyptian tax farms.
Qar╔ (Loan): The literal meaning of Qar╔ is „to cut‟. It is so called
because the property is really cut off from ownership of the lender when it
is given to the borrower. Legally, Qar╔ means to give anything having
value in the ownership of the other by way of virtue so that the latter could
avail of the same for his benefit, with the condition that same or similar
amount of that thing would be paid back on demand or at the settled time.
It is that loan which a person gives to another as a help, charity or advance
for a certain time. The repayment of loan is obligatory. The Holy Prophet
is reported to have said “…..Every loan must be paid……”. But if a debtor
is in difficulty, the creditor is expected to extend time or even to
voluntarily remit the whole or a part of the principal. Qar╔ is, in fact, a
particular kind of Salaf. Loans under Islamic law can be classified into
Salaf and Qar╔, the former being loan for fixed time and the latter payable
on demand.
Qar╔ al-Hasan: A benevolent/virtuous loan; a term used by some;
otherwise, every Qar╔ as per Islamic law has to be Qar╔ al-Hasan. It
means a loan with the stipulation to return the principal sum in the future
without any increase. So it is an interest-free loan.
Qi╖ā╖: A provision of Islamic law to punish those who cause any harm to
the human life - A murderer is executed to death in exchange.
Qimār: Qim┐r means gambling. Technically, it is an arrangement in
which possession of a property is contingent upon the happening of an
uncertain event. By implication it applies to a situation in which there is a
loss for one party and a gain for the other without specifying which party
will lose and which will gain.
Qirā╔ or Muq┐ra╔a: Another name of Mu╔ārabah (a term used by
classical jurists of Iraq) – partnership in which a person or a group of
persons provides funds while the other provides entrepreneurship for

Journal of Islamic Business and Management Vol.2 No.2, 2012 31
conducting the business; Qirā╔ has been used by the Hijaz based classical
jurists.
Qirā╔ Mithl: Matching rate in Qirā╔ / Mu╔ārabah which has to be paid
to the Mu╔ārib in case the Mu╔ārabah / Muq┐ra╔ah contract becomes
voidable due to any technical reason.
Q┘ra═: A measure of landholding or jewellery, a ship-share.
Qirsh: A coin of inferior metals used in ancient Iraq for making payment.
Qiyam┘ or Q┘m┘: Non-fungible goods; value of each unit of which is
different.
Qiyās: It means measure, comparison or analogy. Technically, it means a
derivation of the law on the analogy of an existing law if the basis („Illah)
of the two is the same. It is one of the sources of Islamic law.
Qur’an: The Book of Divine Revelation that was delivered to humankind
through the Holy Prophet Mohammad (pbuh).
Ra’as ul-Māl: Principal amount of a loan or a debt or money invested in a
business - the money or capital which an investor (Rab al-Māl) invests in a
profit- seeking venture.
Ra’s ul-Māl fi Salam: Salam capital, the cash price agreed upon and paid
for the Salam transaction
Rab al-Māl: The investor or the owner of capital in a Mu╔ārabah
contract.
Rab us-Salam: The buyer in deferred delivery sale (Salam) who pays the
price in advance.
Rahn: (See also Pledge), Collateral; legally, Rahn means to pledge or
lodge a real or corporeal property of material value, in accordance with the
law, as security, for a debt or pecuniary obligation so as to make it
possible for the creditor to recover the debt or some portion of the goods
or property. In the pre-Islamic contracts, Rahn implied a type of earnest
money which was lodged as a guarantee and material evidence or proof of
a contract, especially when there was no scribe available to put it into
writing.
Rāi‘┘: Incharge – one who is responsible for his subordinates.
Restricted Mu╔ārabah: (Mu╔ārabah al-Muqayya╔ah), A Mu╔ārabah in

32 Journal of Islamic Business and Management Vol.2 No.2, 2012
which the Mu╔ārib has to observe certain restrictions regarding how the
business may be run. Typically, these restrictions may relate to the sector,
activity, and/or region in which the business may be operated (various
other restrictions also may be included).
Riba: An excess or increase. Technically, it means an increase over the
principal in a loan transaction or in exchange for a commodity accrued to
the owner (lender) without giving an equivalent counter-value or
recompense („Iwa╔) in return to the other party; every increase in debts,
which is without an „Iwa╔ or equal counter-value.
Riba al-Buy┴‘: Riba as involved in exchange transactions; the famous
Hadith regarding exchanging procedure of six items is the basis of Riba al-
Buy┴‘. A sale transaction in which a commodity is exchanged for the
same commodity but unequal in amount and the delivery of at least one
commodity is postponed. To avoid Riba al-Buy┴, the exchange of
commodities from both sides should be equal and also instant if items of
exchange are of the same specie and „Illah (Thammaniyah and edibility);
and instant if „Illah is same – exchanged amount could be different.
Riba al-Duy┴n: Riba of debts.
Riba al-Fa╔l: Riba al-Fa╔l (excess) is the quality premium in exchange of
low quality with better quality goods e.g. dates for dates, wheat for wheat,
etc. – an excess in the exchange of Ribawi goods within a single genus.
The Concept of Riba al-Fa╔l refers to sale transactions while Riba al-
Nasiah refers to loan transactions or debts.
Riba al-Nasiah: Riba Al-Nasiah or Riba of delay is due to exchange not
being immediate with or without excess in one of the counter values. It is
an increment on principal of a loan or debt payable. It generally refers to
the practice of lending money for any length of time on the understanding
that the borrower would return to the lender at the end of the period the
amount originally lent together with an increase on it, in consideration of
the lender having granted him time to pay. There is a general consensus
among scholar that interest, in all modern banking transactions, falls under
purview of Riba al-Nasiah.
Riba al-Qur’an: The same as Riba al- Nasiah.
Ribawi: Goods subject to Fiqh rules on Riba in sales, variously defined by
the schools of Islamic Law: items sold by weight and by measure, foods,
including gold, silver, paper currencies, edible goods like wheat, rice,
barley, dates, salt, etc.

Journal of Islamic Business and Management Vol.2 No.2, 2012 33
Ribh al-Mithl: Matching rate of profit, profit generally earned or charged
in the market in any sector / subsector in an economy.
Rikāz: Buried treasury.
Rishwah: Bribery.
Rizq: livelihood.
Rukbān: Grain dealers coming from the tribal / rural areas to the town for
selling goods.
Rukn: Plural Arkan, Pillar, In Fiqh, an integral part of an act, such as a
business transaction, without which the act can not be said to have been
performed.
Ruq‘a: Banking instrument of early Muslim period. It was a payment
order to draw money from the depository.
╗ā‘: A measure in use during the time of the Holy Prophet used to weigh
dates, barley and other similar items.
╗adaqa: Alms.
╗adaqa Jariyah: Ongoing charity.
╗ak: Plural ╗ukuk, Certificate of equal value representing an undivided
share in the ownership of a tangible asset, usufruct or service.
╗allallaho Alaihe Wassailam (SAW): This is a salutation used by
Muslims whenever referring to the Prophet Muhammad. It is abbreviated
as „SAW‟. It means „peace and blessings of God be upon him‟. In English,
the phrase used is “peace be upon him (pbuh)”.
Sadd al-Zarāi‘: To prohibit a legally allowed transaction on the ground of
blocking the means to an illicit end.
Sahābah: Companions of the Holy Prophet Muhammad (pbuh) of Islam –
The persons who saw the Holy Prophet while being firm believers
(Muslims).
Sahib ul-Māl: Capital Provider in Mushārakah and Mu╔ārabah.
╗ahih: In commerce: a valid contract, opposite of Bā═il. For Hadith: a
Hadith of the highest level of authentication.
Salaf: See also Qar╔, The word Salaf literally means a loan which draws
forth no profit for the creditor. In wider sense, it includes loans for

34 Journal of Islamic Business and Management Vol.2 No.2, 2012
specified periods, i.e. short, intermediate and long-term loans. Salaf is
another name of Salam as well wherein price of the commodity is paid in
advance while the commodity or the counter value is supplied in future;
thus the contract creates a liability for the seller. Amount given as Salaf
cannot be called, unlike Qar╔, before it is due.
╗alah: Ritual prayer; the second pillar of Islam after the Shahadah.
Salam: (See Bai‘ al-Salam), Forward sale contract.
Sān‘e: Means the seller who agrees to supply the item to be manufactured
or constructed pursuant to the Isti╖n┐‘ arrangement or contract.
Sanadāt: Certificates of investment- another name of ╗ukuk.
╗arf or Al-╗arf: Basically, in pre-Islamic times it was exchange of gold
for gold, silver for silver and gold for silver or vice versa. In Islamic law,
such exchange is regarded as „sale of price for price‟ (Bai‘ al-Thaman bil-
thaman), and each price is consideration of the other. It also means sale of
monetary value for monetary value – currency exchange.
╗ukuk: Plural of ╗ak, meaning any financial certificates or investment
instruments of equal value representing proportionate ownership of
tangible assets of particular projects or specific investment activity.
╗ukuk al-Ijārah: Certificates representing the ownership of leased assets,
the ownership of the usufruct of leased assets or the ownership of the
rights to receive benefits from services.
╗ukuk al-Mu╔ārabah: Certificates representing projects or activities
managed on Mu╔ārabah principle by any fund manager or special purpose
vehicle or any other person as Mu╔ārib for management of the business.
╗ukuk al-Murābaha: Certificates representing the investors‟ shares in
receivables from the purchaser of assets based on a deferred sale. As they
represent receivable / debt, they cannot be traded on a price other than the
face value; otherwise Riba is involved.
╗ukuk al-Mushārakah: Certificates representing proportionate ownership
of a Mushārakah asset that can be treated as negotiable instruments
provided the joint venture has some non-liquid assets as well, preferably
more than 50 percent. These are certificates of equal value issued for
mobilising funds to be used on the basis of partnership so that their
holders become owner of the relevant project or the asset as per their
respective share. Mushārakah ╗ukuk can be issued as redeemable

Journal of Islamic Business and Management Vol.2 No.2, 2012 35
certificates by or to the corporate sector or by the individuals for their
rehabilitation/employment, for purchase of automobiles for their
commercial use or for establishment of high-standard clinics, hospitals,
factories, trading centers, endowments, etc.
╗ukuk al-Salam: Certificates representing financial claims arising from
the purchase of commodities to be delivered in the future based on an
advance payment of price; not negotiable.
Saw’ām bi-Sawā’: Meaning equal for equal (in exchange transactions),
Sehm: Plural Esham, Share, an equity instrument.
Shahādah: 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, "Ash-hadu al
lā ilāha illallaah wa ash-hadu anna Muhammadan Abdoh┴ wa Rasuloh┴"
("I tesify that there is nothing rightfully worshipped except Allah and I
testify that Muhammad is the ‘Abd and Messenger of Allah").
Shar═: Plural Shur┴═, 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.
Shar═ e-Jaza’┘: A clause that a purchaser can put in an Isti╖n┐‘ agreement
that price of the item being manufactured would be decreased in case of
delay in delivery by the seller / manufacturer and that delay benefits the
purchaser – unlike all other modes in which any penalty imposed due to
default or delay in payment of liabilities goes to the charity.
Sharī‘ah: The term Sharī„ah refers to divine guidance as given by the
Holy Qur‟an and the Sunnah of the Prophet Muhammad (pbuh) and
embodies all aspects of the Islamic faith, including beliefs and practice.
Sharī‘ah Advisor: An independent professional, usually a classically
trained Islamic legal scholar, that advises an Islamic bank on the
compliance of its products and services with the Sharī„ah, or Islamic law.
While some Islamic banks consult individual Sharī„ah advisors, most
establish a committee of Sharī„ah advisors (often know as a Sharī„ah
board or Sharī„ah committee).
Sharī‘ah Advisory Board; Sharī‘ah Supervisory Board or Sharī‘ah
Committee: A panel of Sharī„ah scholars appointed by Islamic financial
institutions to supervise the transactions and ensure Sharī„ah compliance
of their business. Its role also includes conducting regular and random

36 Journal of Islamic Business and Management Vol.2 No.2, 2012
audits.
Sharī‘ah Compliant: An act or activity that complies with the
requirements of the Sharī„ah, or Islamic law. The term is often used in the
Islamic banking industry as a synonym for "Islamic" - for example,
Sharī„ah compliant financing or Sharī„ah compliant investment.
Sharī‘ah Non-Compliance Risk: The risk arising from non-compliance
to the standards of Islamic law.
Shirkah: A contract between two or more persons who launch a business
or financial enterprise to make profits. In the conventional books of Fiqh,
the partnership business has been discussed under the caption of Shirkah
that, broadly, may include both Mushārakah and Mu╔ārabah.
Shirkah al-‘Aqd: A „Business partnership‟ established through a
deliberate contract for the purpose of earning prifit.
Shirkah al-‘Inān: It is the commonest type of Shirkatul ‘Aqd and refers to
a partnership between two or more parties with capital not necessarily
equal, for the purpose of earning profit by means of investment in a joint
business venture.
Shirkah al-Amwāl: The commonest type of Shirkatul ‘Aqd which refers
to a partnership between two or more parties for the purpose of earning
profit by means of investment in a joint business venture.
Shirkah al-‘Aqd (commercial / contractual partnership): A proper
partnership in which the parties concerned enter into a contractual
agreement for joint investment, profit earning and the sharing of profits
and risks.
Shirkah al-Ma╖rafiyya: Shirkah or Mushārakah as being operated by
Islamic banks and financial institutions.
Shirkah al-Milk: (partnership of ownership or in the right of ownership),
Partnership that arises automatically due to joint inheritance or gift, or a
partnership that arises by choice as for example when two persons buy a
house together. Its rules are different from the commercial / contractual
partnership; its objective is not the commercial business.
Shirkah al-Wuj┴h: A „partnership of creditworthiness / goodwill‟ where
the subject matter is bought on credit from the market on the basis of a
relationship of goodwill with the supplier, with the aim of reselling at a
profit to be shared.

Journal of Islamic Business and Management Vol.2 No.2, 2012 37
Shuf‘ah: 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.
Sigha al-‘Aqd: Sighah is a term used by the Fuqah┐ 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 (Ijāb) on the part
of one contractual party and an acceptance (Qab┴l) 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.
Suftajah: A type of commercial paper / instrument used for the delegation
of credit during the Muslim period, especially the „Abbasides period. It
was used to collect taxes, disburse government dues and transfer funds by
merchants. It was the most important commercial instrument used by
traveller merchants. In some cases Suftajahs were payable at a future
fixed date and in other cases they were payable on sight. Suftajah is
distinct from the modem bill of exchange in some respects. Firstly, a sum
of money transferred by Suftajah had to keep its identity and payment had
to be made in the same currency. Exchange of currencies could not take
place in this case. Secondly, Suftajah usually involved three persons. 'A'
pays a certain sum of money to 'B' for agreeing to give an order to 'C' to
pay back to 'A'. Third, a Suftajahs could be endorsed. The ‘Arabs had
been using endorsements (Hawala) since the days of the Holy Prophet
(pbuh).
Sunnah: Custom, habit or way of life. Technically, it refers to the
utterances of the Holy Prophet (pbuh) known as Hadith, or his personal
acts, or sayings of others, tacitly approved by the Prophet.
T‘al┘q: Conditions which suspend a contract to any future event.
Ta‘āmul: Custom.
Ta‘āwun: Mutual help/co-operation; Muslim are required by the Sharī„ah
to help each other in times of need and to live together with harmony
sharing happiness and sorrow with each other.
Ta‘z┘r: Punishments not expressly provided in the Holy Qur‟an and
Sunnah; awarded by the Judge at his own discretion, keeping in view the
severity of the crime.

38 Journal of Islamic Business and Management Vol.2 No.2, 2012
Tabarru‘: Any benefits given by a person to other without getting
anything in exchange is called Tabarru„. In Takāful, the whole or a part
of the payment made to the Takāful operator (Waqf Fund) is considered
Tabarru„ that no longer remains asset of the policy holder as an individual.
Gracious repayment of debt, absolutely at borrower‟s own discretion and
without any prior condition or inducement for reward, is also covered
under Tabarru„. Repaying a loan in excess of principal and without a pre-
condition is commendable and compatible with the Sunnah of the Holy
Prophet (pbuh). But, it cannot be adopted as a system because it would
mean that the loan would necessarily yield a profit. If such reward takes
the form of a system, it is considered Riba.
Tabzīr: Spending wastefully on objects which have been explicitly
prohibited by the Sharī„ah irrespective of the quantum of expenditure.
Tadāwul: Exchange, circulation of money in an economy.
Tadl┘s al-‘Aib: An act of a seller intentionally hiding the defects of goods;
it is prohibited by the Sharī„ah.
Takāful: It is an Islamic alternative to the conventional insurance based
on the principle of Ta‘āwun or mutual help by members of a group –
policy holders, while observing the rules and regulations of Islamic law.
Policy holders jointly cover the defined losses to the members of Takāful
pool on mutual consideration.
Takāful Operator: The Takāful company who manages the business.
Talaqqi al-Jalab: One of the commercial practices of early „Arabia:
traders would, on hearing of a merchandise caravan, proceed out of the
city to meet the caravan on the way for buying the entire merchandise; this
they would sell in the city market at higher price. Prohibited by the Holy
Prophet – let the sellers come in the market and then sell in the
competitive environment.
Tāmīn: „Arabic word used for the insurance.
Tanājush: A conspiracy between a seller and a buyer wherein a buyer
gives a false higher bid or apparently purchases an item from the seller at a
price higher than that of the market thereby enticing other buyers to buy
the items at a price higher than the market price. The seller thus makes a
big profit. This act is prohibited by the Sharī„ah.
Taql┘d: Means "imitation" in the following of precedent and is
particularly relevant to the period of Islamic history during which it is said
that there was a "closing of the gate of Ijtihād ".

Journal of Islamic Business and Management Vol.2 No.2, 2012 39
Taqwa: Piety, virtue and righteousness with sense of accountability to
Allah (swt). It encompasses not only obedience to Allah, but also the love
of fellow human beings who should be treated as part of an extended
human family.
Tawarruq (Fiqhi): A tool that gives someone liquidity by way of trading
activity wherein the objective is to get money and not any commodity. For
Tawarruq, a person purchases a commodity on credit and sells the same to
any third party / in the market in accordance with Sharī„ah principles.
Tawl┘yah: A form of sale in which the goods are sold on the cost price
without charging any profit.
Temporary Mushārakah: Redeemable investment in any joint business
for a mutually stipulated period, say one, three or ten years. It means that
the bank can invest by purchasing Shirkah based Term Finance
Certificates (TFCs), participation term certificates (PTCs) or ╗ukuk for
short, medium and long term periods, depending upon the need of the
client.
Thaman: Consideration for the subject matter in a contract, or price in a
valid sale, the price should be clear and definite.
Thaman al-Hāll: Immediately payable price.
Thaman al-Mithl: Normal / market price that has to be paid in case any
issue arises in deciding the actual price in any transaction.
Thaman Mu’ajjal: Deferred price.
Tijarah: Trade or business.
‘Ulam┐: Islamic scholars.
‘Uq┴d al-Tabarru‘┐t: (Uqood e-Ghair Mu„āwa╔ha), Non-commutative
contracts wherein one cannot get any return or compensation, like
contracts of loan (Qar╔), gift (Tabarru‘ /Hibah), Guarantee (Kaf┐lah) and
assignment of debt (Hawalah).
‘Uq┴d Ishtirāk: Contracts of participation or partnership.
‘Uq┴d al-Mu‘āwa╔ah: Commutative / exchange contracts in which one
can genuinely take any profit or return, like contracts of Bai‘, Ijārah and
Wak┐lah.
‘Urb┴n: (See Bai‘ al-„Arb┴n).

40 Journal of Islamic Business and Management Vol.2 No.2, 2012
‘Urf: Custom, Customary practices.
‘Ushr: Islamic charge on agricultural produce.
’Ujrah tul-Mithl: It denotes a remuneration or compensation which has to
be given as per normal market rate in case the underlying contract(s)
become voidable.
’Ujrah: Financial payment for the utilization of services. Payment for
services taken from any one; different from Ju„alah which means giving a
reward for accomplishment of a defined task. While in ‟Ujrah, acceptance
of „Offer‟ by a specified person is necessary, in Ju„alah any one who
listens the offer can undertake the work, becomes entitled to reward only
upon completion of the job.
’Ummah: The Muslim Community.
U╖ul al Fiqh: Means the "roots of the law", which are (a) the Qur‟an, (b)
the Sunnah, (c) the Ijm┐„, or "consensus" of the community of Islamic
scholars, and (d) the Qiy┐s, or analogical deductions and reasoning of the
Islamic scholars with respect to the foregoing. The Qur‟an and the Sunnah
are often referred to as the "revealed" sources.
Wa‘dah or Wa‘d: Promise - does not create contractual rights and
obligations; could be binding or unbinding.
Wadi‘ah: A basis for safe keeping of deposits (Amānah) on which no
profit can be sought where the trustee is allowed to use the goods
(amount) kept in his custody. In principle, the trustee is not responsible for
loss except in case of negligence on his part. If, however, the Amānah
amount is used in business, with permission of the owner, the amount
becomes trustee‟s liability.
Wak┘l: Agent or authorized person, who can act as an authorized
representative to do any job on behalf of any other; a Wak┘l has crucial
role in all matters pertaining to Islamic commercial law.
Wakālah: Agency relationship, Contract of agency, can be commutative
or non-commutative.
Wa╖iyah: Will, testament, bequest; the statement of a Muslim in which he
details the manner in which one-third, at the maximum, of his wealth is
given for charitable purposes after his death. The two-thirds have to be
distributed among the legal heirs as per Muslim inheritance law given by
the Holy Qur‟an. During the life time, one can spend for charity as he /
she wishes, keeping in view the requirements for self and the family; but it

Journal of Islamic Business and Management Vol.2 No.2, 2012 41
is not part of Wa╖iyah.
Wak┘l bi-Shira: The agent assigned to purchase.
Wak┘l bi-Taq┐╔i Dayn: The agent assigned to retrieve debt.
Wak┘l bil-Bai‘: The agent assigned to sell.
Wak┘l bil-Khasooma: The agent assigned to deal with common disputes.
Wak┘l bil-Qab╔: The agent assigned to take possession of debt or any
other asset.
Wakālah tul-Istithmār: (Investment agency), It is an agency contract,
where an investor appoints the financial institution (agent) to carry out on
his behalf the investment, for a fee or for no fee, as the case may be –
generally for a fee. The investor gets all the profit or loss while the fund
manager gets a pre-agreed service fee or commission that could be a lump
some amount or a certain percentage of the invested capital.
Wakālah Muqayya╔a: The same as the restricted agency agreement.
Wakālah Mutlaqa: The same as the un-restricted agency agreement.
Waqf: Detention of a property. Technically tying-up of a property in
perpetuity - no propriety rights can be exercised over it; Retention of a
property for the benefit of a charitable or humanitarian objective, or for a
specified group of people such as any charity institution or the members of
the donor‟s family. There are three kinds of Waqf in Islamic
jurisprudence: Religious Waqf, Philanthropic Waqf and the Family Waqf.
The Waqf property can neither be sold nor inherited or donated to anyone.
The concept of waqf is used in Takāful; if any Waqf is terminated due to
any reason, its assets have to be given in charity.
Waqf Ahli or Waqf Kha╖: Family Waqf.
Waqf al Khairiya: Charitable Waqf.
Wuj┴h: (Lit.face), interpreted in financial transactions as goodwill or
creditworthiness in partnership.
Yadam bi-Yadin: Hand to hand or on spot (in exchange transactions).
Zakat / Zakah: Zakat is the third out of five pillars of Islam. Literally, it
means purification, increase, or cultivation of good deeds. In Sharī„ah, it is
a religious charge on Muslims having wealth over and above an

42 Journal of Islamic Business and Management Vol.2 No.2, 2012
exemption limit (Nisāb) at a rate fixed by the Sharī„ah. As such, it is not
the tax on income, but on the assets held by a Muslim at a prescribed date
(a Zakat day has to be determined for calculation of Zakat money, to be
paid annually) over and above the amount of Nisāb after fulfillment of
normal needs of the owner. It is a specified amount in wealth of well-of
Muslims prescribed by Allah the Almighty for the benefit of those who are
entitled to Zakah as specified in the Qur‟an. It is levied on cash, cattle,
agricultural produce, minerals, capital invested in industry, and business
etc. The rates are different for different natures of assets. The recipients of
Zakah fund have been identified in the holy Qur‟an (9:60), which are the
poor, the needy, Zakah collectors, new converts to Islam, travellers in
difficulty, captives and debtors and for the cause of the Almighty.
Zakat al-Fi═r: A small fixed tax payable towards the end of Rama╔an by
every Muslim who has the means for himself and his dependants. It is paid
once annually at the end of Rama╔an before Eid al Fi═r.
Zakat al-Hub┴b: Zakat on grain / corn.
Zakat al-Ma‘ādin: Zakat on minerals.
Zakat al-Māl: The Muslims wealth levy; a Muslim must pay 2.5% of his
wealth, if above the Nisāb, to the less fortunate members of the
community.
Zakat al-Rikāz: Zakat on treasures /precious stones found by someone.
Zakat al-Tijārah: Zakat on commercial assets in a business or trade.
╙ulm: Injustice, usurping others‟ rights, not giving proper recompense in
an exchange by way of any illegal act – Riba, cheating or coercion. Refers
to all forms of injustice, exploitation or oppression through which a person
deprives others of their rights or does not fulfill obligations towards them.
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