Hajj Finance Company Limited
 
Glossary
Page: 1 | 2 | 3 | 4 | 5
Rab-al-maal
 
In a mudaraba contract the person who invests the capital.
 
Riba
 

This term literally means an increase or addition. Technically it denotes any increase or advantage obtained by the lender as a condition of the loan. Any risk-free or "guaranteed" rate of return on a loan or investment is riba. Riba, in all forms, is prohibited in Islam. In conventional terms, riba and "interest" are used interchangeably.

 
Riba al Buyu
 

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-buyu, the exchange of commodities from both sides should be equal and instant. Riba-al-buyu was prohibited by the prophet Mohammad to forestall riba (interest) from creeping into the economy from the back door.

 
Riba al Fadl
 
Usury of trade. It is an alternative term for riba al-buyu.
 
Riba al Diyun
 
Usury of debt.
 
Riba al Nasia
 
Increment on the principal of a loan payable by the borrower. It 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 this period the amount originally lent together with an increment in consideration of the lender having granted him time to pay. The increment was known as riba al-nasia. It was in vogue in Arabia in the days of the Prophet Muhammad.
 
Ruq'a
 
Banking instrument of the early Muslim period. It was a payment order to draw money from the bank.
 
Sadaqah
 

Charitable giving.

 
Samad
 
Shariah Compliant property mortgage in the US.
 
Shariah / Sharia / Shari'a
 

Islamic cannon law derived from 3 sources: the Quran; the Hadith (sayings of the Prophet Muhammad); and the Sunnah (practice and traditions of the Prophet Muhammad).


OR


Islamic law as revealed in the Quran and through the example of Prophet Muhammad. A Shariah compliant product meets the requirements of Islamic law. A Shariah board is the committee of Islamic scholars available to an Islamic financial institution for guidance and supervision in the development of Shariah compliant products.

 
Shirkah
 
A contract between two or more persons who launch a business or financial enterprise to make profit.
Shirka = Musharaka
 
Suftajal
 
A type of banking 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 banking 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 Prophet Muhammad.
 
Sukuk
 

Sukuk (certificates) represents the holder’s proportionate ownership in an undivided part of an underlying asset where the holder assumes all rights and obligations to such asset.

 
Takaful
 
Mutual support which is the basis of the concept of insurance or solidarity among Muslims.
 
Takaful
 
This is a form of Islamic insurance based on the Quranic principle of Ta'awon or mutual assistance. It provides mutual protection of assets and property and offers joint risk sharing in the event of a loss by one of its members. Takaful is similar to mutual insurance in that members are the insurers as well as the insured. Conventional insurance is prohibited in Islam because its dealings contain several haram elements including gharar and riba, as mentioned above.
 
Tawarruq
 
Reverse murabahah. As used in personal financing, a customer with a genuine need buys something on credit from the bank on a deferred payment basis and then immediately resells it for cash to a third party. In this way, the customer can obtain cash without taking an interest-based loan.
 
Wakalah
 
(Takaful model) is a form of representative relationship between an operator and participant.
· The contract of Tabarru' wherein the participant agrees to donate a pre-determined percentage of contribution to the fund to provide assistance to fellow participants
· The contract of Al-Wakalah wherein the participant authorises the Takaful company to conduct affairs of the fund on his/her baahalf.
 
Waqf
 
Lit: detention. Technically appropriation or tying-up of a property in perpetuity so that no propriety rights can be exercised over the usufruct. The Waqf property can neither be sold nor inherited or donated to anyone. Awqaf consists of religious foundations set up for the benefit of the poor.
 
Zakah/Zakat
 
A tax which is prescribed by Islam on all persons having wealth above an exemption limit at a rate fixed by the Shariah. According to the Islamic belief Zakah purifies wealth and souls. The objective is to take away a part of the wealth of the well-to-do and to distribute it among the poor and the needy. It is levied on cash, cattle, agricultural produce, minerals, capital invested in industry, and business etc. The distribution of Zakah fund has been laid down in the Qur'an (9:60) and is for the poor, the needy, Zakah collectors, new converts to Islam, travellers in difficulty, captives and debtors etc. It is payable if the owner is a Muslim and sane. Zakah is the third pillar of Islam. It is an obligatory contribution which every well-off Muslim is required to pay to the Islamic state, in the absence of which individuals are required to distribute the Zakah among the poor and the needy as prescribed by the Shariah.
 
Zakat (Religious Tax)
 
There are two type of Zakat:
· Zakat al-Fitr which is payable by every Muslim able to pay, at the end of Ramadan (the month of fasting). This is also called Zakat al-Nafs (Poll Tax).
· Zakat al Maal is an annual levy on the wealth of a Muslim (above a certain level). The rate paid, differs according to the type of property owned. This tax is earmarked for amongst others for the poor and needy