Islamic Finance

A cost-plus sale in which the seller discloses the purchase price and adds an agreed profit margin. Widely used by Islamic banks to finance purchases without interest.

A leasing contract in which the bank buys an asset and leases it to a client for rent; ownership may transfer at the end (ijarah muntahia bittamleek).

Banking conducted according to Sharia, replacing interest with profit-and-loss sharing and asset-backed contracts; also called participation banking.

Gambling or games of chance, in which wealth is gained by pure chance at another's loss. It is forbidden in Islam and excluded from Islamic finance.

A partnership where one party provides capital and the other provides labour and expertise; profits are shared by agreed ratio while losses fall on the investor.

A joint-venture partnership in which all partners contribute capital and share profits and losses in proportion to their stake.

Sharia-compliant financial certificates, often called "Islamic bonds", representing ownership in tangible assets or projects rather than interest-bearing debt.

Islamic cooperative insurance in which participants contribute to a pooled fund to support one another against loss, avoiding interest and uncertainty.

The branch of Islamic jurisprudence governing commercial and financial transactions — contracts, trade, partnerships, and the rules of lawful earning.

A manufacturing or construction contract in which goods are produced to order, with price and specifications agreed in advance and payment flexible.

The core principle of Islamic finance whereby returns are earned by sharing real risk in an enterprise rather than charging fixed interest.

A benevolent, interest-free loan repaid only in its principal amount; an act of charity encouraged in the Quran.

A forward sale in which the buyer pays in full now for goods to be delivered later — permitted by exception, often used to finance agriculture.

A panel of qualified scholars that reviews and certifies an Islamic financial institution's products and operations for Sharia compliance.

Describes a product, investment, or transaction that meets Islamic legal requirements — free of interest, excessive uncertainty, gambling, and forbidden industries.

An agency contract in which one party authorises another to act on its behalf for a fee, used in fund management and many Islamic banking services.

A down payment made to reserve a purchase; if the sale proceeds it counts toward the price, and if not the seller may retain it. Likened to an option in modern finance.

The sale of a debt or receivable to a third party. Its permissibility and conditions vary considerably between the schools and modern markets.

A sale-and-buyback in which an asset is sold on credit then repurchased for less in cash, effectively a loan with interest. Most scholars prohibit it.

The public treasury of an Islamic state, historically managing zakat, war gains, land taxes, and public expenditure for the community's welfare.

A transfer of debt or a traditional money-transfer system based on trust among brokers, allowing funds to move without physical cash crossing borders.

A gift or voluntary transfer of property without compensation; sometimes given by Islamic banks as a discretionary reward on deposits.

A historical per-capita tax levied on able-bodied non-Muslim men under Muslim rule, in lieu of zakat and military service, granting them protection.

A guarantee in which one party assumes responsibility for another's liability or obligation; the basis of Islamic guarantees and some takaful structures.

A historical land tax levied on agricultural land in territories brought under Muslim rule, a major source of state revenue.

A one-fifth levy — historically on war gains and certain windfalls in Sunni law, and an annual tax on surplus income in Twelver Shia practice.

A pledge or collateral given as security for a debt, which the creditor may hold until the obligation is repaid.

Buying a commodity on deferred payment then selling it for cash to a third party to obtain liquidity. Its common banking form is debated among scholars.

A tithe of one-tenth (or one-twentieth for irrigated land) on agricultural produce, a form of zakat due on crops.

A safekeeping deposit in which one party entrusts assets to another for protection; the basis of Islamic current-account deposits.