Glossary of islamic finance terms, courtesy of meezan bank limited ayaan. Down payment deposit to retain a right to transact future date al ayn. In these circumstances, unawareness and confusion exist as to the form of the islamic financial system and instruments. 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. Introduction a financial system that is based on islamic principles and values, which eliminates riba and ensure a profit sharing mechanism in the financial system. Islamic law also forbids the payment or receipt of interest. Basically, islamic finance is a financial system designed on risk sharing and prohibition of debt financing leveraging. Outline of lectures on islamic banking and finance. Islamic finance is a financial system that operates according to islamic law which is called sharia and is, therefore, shariacompliant. Islamic finance, based on religious principles which avoid interest and pure monetary speculation, is growing rapidly, supported by large pools. The range of financial transactions that conform to the sharia, or islamic law.
An islamic financial system avoids interest and interestbased assets hassan and lewis 2007 offered a comprehensive description of islamic modes of financing which are based on profit and loss sharing investment, types of risks in islamic banking, and financial innovations, including access to capital markets and securitization, introduced. Also spoken with regard to economic role of the islamic state. This glossary is not limited to islamic terms and contains arabic and english terms that are also referred to in the study of. The islamic calendar starts from the year prophet muhammad s. Islamic finance glossary of terms and contracts arabic. The term islamic finance is used to refer to financial activities conforming to islamic law sharia. Glossary definition of glossary by the free dictionary. Glossary of islamic finance terms and contracts a absentes a contract where the parties are not present at the time of agreement accounting and auditing organisation for islamic financial. Derives from the word ilah which means the one deserving all worship, the. Glossary of islamic banking terms islamic bankers resource centre. Aqd is a central term in islamic business law, which means.
Earning profit is legitimised only by risksharing and engaging in an economic venture. A comparative study of islamic financial system and. Hawala is a mechanism for settling international accounts, by book transfers. System of accountability in an islamic state in order to check unlawful practices. Islamic finance is governed by the sharia islamic law, sourced from the quran and the sunnah.
The first installment of a global finance faq web series on islamic finance. Islamic finance, based on religious principles which avoid interest and pure monetary speculation, is growing rapidly, supported by large pools of shariacompliant funds in the gulf and the. Islamic financial systems international monetary fund. Worthington school of accounting and finance, university of wollongong islamic finance is one of. It lacks the required extent and level of theories and models needed for expansion and implementation of the framework provided by islam. Islamic financial companies have developed many different products to meet customer needs and provide shariacompliant alternatives to widely available conventional options. Pdf a comprehensive glossary of terms in islamic commercial. Principles of an islamic financial system the basic framework for an islamic financial system is a set of rules and laws, collectively referred to as shariah, governing economic, social, political, and cultural. The major proposition of islamic finance system is the.
Global finance magazine what is islamic finance and how. In answering these questions, vissers systematic treatment of the belief system and a discussion on the acceptability of disputed instruments of islamic finance distinguish the book from others in its field. Refers to commission, fees or wages charged for services. Islamic finance forbids investment in industries considered sinful, notably alcohol, pornography and armaments. In its preislamic usage, the term was applied to the ruling family of a clan or tribe, and thus it implies a certain nobility and right to rule. One of the main principles of the islamic finance system. Shariahcompliant investments are structured on the exchange of ownership in tangible assets.
Contract, consisting of all tenets of a contract arbun. A glossary of islamic terminology by bassam sulaiman abughosh and wafaa zaki shaqra 1992, hardback, 271 pgs. Alaariyah means loan of a particular piece of property, the substance of which is not. However, these entities are governed both by islamic law and the finance industry rules and regulations that. Its literal meaning is to invite others to islam and is the islamic equivalent to the christian word, mission.
Introduction to islamic banking and finance is supported by a detailed, easy to use instructor manual, powerful test bank generator and dynamic powerpoint slides. Islamic banking is a banking system based on the principles of islamic law also known as shariah and guided by islamic economics. Literally means the people of the book the holy quran and the sayings and. The following definitions are intended to assist readers in their understanding of. A financial instrument devised by islamic investment companies to mobilize funds for investment. Glossary the fundamental principle of islamic finance is that money has no intrinsic value. Earning profit is legitimized only by engaging in an economic venture, risk sharing and. It lacks the required extent and level of theories and models needed for expansion and implementation of the framework. The concept of ijarah muntahia bi tamleek is an alternative to finance leasing and in particular hirepurchase financing. Ahl albait the words occur in the holy quran when angels came to. It is usually applied in the agricultural sector where the bank advances money for various inputs to receive a share in the crop, which the bank sells in the market. A general term which conveys the meaning of justice, equity and fairness.
The islamic financial system is not much different from the products and services in the traditional financial system but it operations are essentially based on a certain set of moral and ethical principles. All the undertakings of the banks in the system follow. An arrangement whereby a valuable asset is places as collateral for a. This refers to a public land which is reserved for the use of a person or a group, excluding other. A mudarabah certificate can be for a specific purpose or for a general purpose.
Advanced diploma in islamic finance, students can now specialise in areas of their choice which provides a more relevant and focused learning and development. The islamic financial services industry has developed from early theoretical writings om interestfree finance in the 1940s 1960s into the growing global establishment of islamic financial institutions in the 21st century. Many arabic concepts have an arabic secular meaning as well as an islamic meaning. Islamic finance is a way of doing financial transactions and banking while respecting islamic law or sharia. This holy book of the muslims consisting of the revelations made by god to the prophet muhammad, peace be on him, during his prophet hood of about 23 years. Law, economics and practice, cambridge university press, 2006. This forces credit to be either interestfree, or, more commonly, to take the form of a partnership or joint venture. Earning profit is legitimised only by risk sharing and engaging in an economic venture. Definition and meaning an economic system is an organized way in which a country allocates resources and distributes goods and services across the whole nation or a given geographic area. From its beginning, islam gave a positive approach to wealth creation, recognized private property, and emphasized fulfillment of. Some of these cookies are essential to the operation of the site, while others help to.
This makes the analysis of the health and soundness of deposit takers central to any assessment of financial system stability. Glossaries for translators working in spanish, french, japanese, italian, etc. Islamic banking terms glossary hong leong islamic bank. Under islamic financial principles, an asset recovery effort can be a tough task for an individual who does not have any idea about islamic banking or islamic financial terminology. Gharar is a sophisticated concept that covers certain types of uncertainty. Alijarah thumma albai aitab lease contract followed by ownership of asset through a sale contract. The basic framework for a financial system in islam is a set of laws and rules, collectively referred to as shariah, governing social, political, economic and cultural aspects of islamic. Glossary of islamic finance terms the five pillars of islamic finance the ban on interest interest must not be charged or paid on any financial transaction, as interest or the intrinsic value of the money is.
Islamic finance is an old concept but a very young discipline in the academic sense. Definitions, sources, principles and methods alsadek h. Nurul islam deputy managing director islami bank bangladesh limited. Rent with eventual sale hirepurchase financial lease. A term that refers to the islamic world and means house of islam. The islamic financial services industry has developed from early theoretical writings om interestfree finance in the 1940s 1960s into the growing global establishment of islamic financial institutions in.
Just like conventional financial systems, islamic finance features banks, capital markets, fund managers, investment firms, and insurance companies. List of books and articles about islamic banking online. Middle english glosarie, from latin glossarium, from. Islamic finance financial definition of islamic finance. Technically, a financing technique adopted by islamic banks that takes the form of murabaha. Technically, a financing technique adopted by islamic banks, it is a contract in which the seller allows the buyer to pay the price of a commodity at a future date in a lump sum or in installments.
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