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A - Z of Islamic finance

Learn more about Islamic finance terminology with our A to Z of Islamic finance.

H to N

  • Hamish Jiddiyah
  • A down payment by a party who intends to purchase certain goods and wishes to confirm their intention to do so
  • Ibaha
  • The rule that every economic transaction is permissible, unless expressly and specifically forbidden by the Sharia
  • Ijara
  • A form of leasing. It involves a contract where the bank buys and then leases an item to a customer for a specified rental, over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance.
  • Ijara with Diminishing Musharaka
  • The principle of Ijara with Diminishing Musharaka can be used for home-buying services.  One party’s ownership in an asset increases each time an additional capital payment is made; at the same time the other party’s ownership decreases by a similar amount. Parallel to this, a contract is agreed where the share of the asset which is not owned by one party is leased to them by the other Sharia prohibits any clauses in contracts which make them interdependent on each other with a complicated outcome which is not Sharia compliant. This is not the case with Al Rayan Banl Ijara with Diminishing Musharaka contracts, where the outcomes are wholly Sharia compliant and are extremely straightforward for all parties.
  • Inan
  • A form of partnership in which each partner contributes capital and has the right to work for the business but not necessarily equally
  • Iqtisad Islami
  • An Islamic approach to economic matters
  • Israf
  • Wasteful expenditure
  • Istijar
  • Hiring or renting
  • Istisna'a
  • A contractural agreement for manufacturing specified goods that can be sold before it is manufactured or comes into existence, allowing cash payment for future delivery or future payments and future delivery.
  • Ja`iz
  • A non-binding contract
  • Mal
  • Anything valuable which can be possessed, such as property
  • Maysir
  • Games of chance or gambling
  • Mu'amalat
  • A transaction related to an exchange of goods or services
  • Mudaraba
  • An investment on your behalf by a more skilled person. It takes the form of a contract between two parties - one who provides the funds and the other who provides the expertise. The division of any profit is agreed in advance.
  • Murabaha
  • A contract for purchase and re-sale for cost plus profit, which allows the customer to make purchases without having to take out a loan and pay interest
  • Musawamah
  • To bargain on price, where the seller does not disclose the original cost of the goods
  • Musharaka
  • Partnership. A Musharaka contract involves a person placing their capital with another person's capital and them both sharing the risk and reward.
  • Nisab
  • Exemption limit for the payment of Zakat
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Glossary of terms

Learn more about Islamic finance with our glossary of terms.

 

How is Islamic finance different?

Islamic finance works differently to conventional banking and is regarded as ethical by those who use it. But how is it different and why is it considered ethical?

More information about Islamic finance

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    A - Z of Islamic finance

    From 'Ajr' to 'Zalat', read our A - Z glossary of Islamic finance terms.

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    Sharia compliance FAQ

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Frequently asked questions about Islamic finance

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