| A-E, F-L, M-P, Q-S, T-Z |
| Fatwah
|
| A
religious decree. |
| Fiqh
|
| Islamic
jurisprudence. The science of the Shariah. It is an important
source of Islamic economics. |
| Fiqh
|
| Jurisprudence |
| Gharar
|
| Lit:
uncertainty, hazard, chance or risk. Technically, sale
of a thing which is not present at hand; or the sale of a thing
whose consequence or outcome is not known; or a sale involving
risk or hazard in which one does not know whether it will come
to be or not, such as fish in water or a bird in the air. |
| Gharar
|
|
Deception
through ignorance by one or more parties to a contract. Gambling
is a form of gharar because the gambler is ignorant
of the result of the gamble. There are several types of gharar,
all of which are haram. The following are some examples:
- Selling
goods that the seller is unable to deliver
- Selling
known or unknown goods against an unknown price, such as
selling the contents of a sealed box
- Selling
goods without proper description, such as shop owner selling
clothes with unspecified sizes
- Selling
goods without specifying the price, such as selling at the
'going price'
- Making
a contract conditional on an unknown event, such as when
my friend arrives if the time is not specified
- Selling
goods on the basis of false description
- Selling
goods without allowing the buyer the properly examine the
goods
|
| Gharar |
| The
root Gharar denotes deception. Bay’ al-Gharar is an exchange
in which there is an element of deception either through ignorance
of the goods, the price, or through faulty description of the
goods. Bay' al-Gharar is an exchange in which one or both
parties stand to be deceived through ignorance of an essential
element of exchange. Gambling is a form of Gharar because the
gambler is ignorant of the result of his gamble. |
| Hadith
|
| Prophet's
commentary on Qur'an |
| Halal
|
| That
which is permissible. The concept of halal has spiritual
overtones. In Islam there are activities, professions,
contracts and transactions which are explicitly prohibited (haram)
by the Qur'an or the Sunnah. Barring
them, all other activities, professions, contracts, and transactions
etc. are halal. This is one of the distinctive
features of Islamic economics vis-a-vis Western economics where
no such concept exists. In Westem economics, all activities
are judged on the touchstone of economic utility. In Islamic
economics, other factors, mostly spiritual and moral are also
involved. An activity may be economically sound but may
not be allowed in the Islamic society if it is not permitted
by the Shari'ah. |
| Hajj |
|
Hajj
means pilgrimage to Mecca and other holy places. 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 13th day of that month
in the Islamic lunar calendar.
|
| Hanifite
laws |
| Islamic
school of law founded by Imam Abu Hanifa. Followers of
this school are known as Hanafis. |
| Hawala
|
| Lit:
bill of exchange, promissory note, cheque or draft. Technically,
a debtor passes on the responsibility of payment of his debt
to a third party who owes the former a debt. Thus the
responsibility of payment is ultimately shifted to a third party.
Hawala is a mechanism for settling international accounts,
by book transfers. This obviates, to a large extent, the
necessity of physical transfer of cash. The term was also
used historically in public finance during the Abbaside period
to refer to cases where the state treasury could not meet the
claims presented to it and it directed the claimants to occupy
a certain region for a specified period of time and procure
their claims themselves by taxing the people. This method
was also known as ‘Tasabbub’. The taxes
collected and transmitted to the central treasury were known
as ‘Mahmul’, while those assigned to the
claimants were known as ‘Musabbub’. |
| Haram
|
| Unlawful |
| Ijara
|
| Lit:
letting on lease. Technically, sale of a definite usufruct in
exchange for a definite reward. Commonly used for wages, it
also refers to a contract of land lease at a fixed rent payable
in cash. It is contrary to "Muzarah" when rent
is fixed as a certain percentage of the produce of land.
It also refers to a mode of financing adopted by Islamic banks.
It is an arrangement under which an Islamic bank leases equipment,
a building or other facility to a client against an agreed rental.
The rent is so fixed that the bank gets back its original investment
plus a profit on it. |
| Ijara
(Leasing) |
|
Leasing
is also a lawful method of earning income, according to Islamic
law. In this method, a real assets such a machine, a car,
a ship, a house, can be leased by one person (lessor) to the
other (lessee) for a specific period against a specific price.
The benefit and cost of the each party are to be clearly spelled
out in the contract so as any ambiguity (Gharar) may be avoided.
Leasing
is emerging as a popular technique of financing among the
Islamic banks. Some of the Islamic banks that use this technique
include Islamic Development Bank, Bank Islam Malaysia and
many commercial banks in Pakistan.
Under
this scheme of financing an Islamic bank purchases an asset
as per specification provided by the client. The period of
lease may be determined by mutual agreement according to nature
of the asset. During the period of the lease, the asset remains
in the ownership of the lessor (the bank) but its right to
use is transferred to the lessee. After the expiry of the
lease agreement, this right reverts back again to the lessor.
Leasing
as a technique of Islamic finance holds a lot of promise and
potential to develop into a viable and power tool of financing.
At present many Islamic banks are experimenting with various
forms of leasing one of which is the lease purchase agreement.
In this scheme, the lessee can purchase the equipment at the
end of the lease period at a price that is agreed in advance.
In most cases, the payment may constitute of the two components:
rent and a portion of the price to be paid in the instalments.
In another variant of lease purchase agreement, the rent may
itself constitute the part payment of the price.
|
| Ijara
(Leasing) |
| A
contract under which a bank purchases and leases out equipment
required by its client for a rental fee. The duration of the
lease and rental fees are agreed in advance. Ownership of the
equipment remains in the hands of the bank. |
| Ijara
wa Iqtina (Lease to Purchase) |
| The
same as ijara except the business owner is committed
to buying the equipment at the end of the lease period. Fees
previously paid constitute part of the purchase price. This
type of lease to purchase agreement is commonly used for home
financing. |
| Ijara-Wa-Iktina
(Lease Purchase) |
| Like
Ijara, except that the client is committed to purchase the equipment
at the end of the rental period. It is pre-agreed that at the
end of the lease period the client will purchase the equipment
at an agreed price from the bank, with rental fees paid to date,
forming part of the price. |
| Ijtehad
|
| Lit:
effort, exertion, industry, diligence. Technically, endeavour
of a jurist to derive or formulate a rule of law on the basis
of evidence found in the sources. |
|
Iman
|
| Faith |
| Istisna
(Progressive Financing) |
| A
contract of acquisition of goods by specification or order where
the price is paid progressively in accordance with the progress
of a job. An example would be for the purchase of a house to
be constructed, payments are made to the developer or builder
according to the stage of work completed. This type of financing
along with bai salam are used as purchasing mechanisms,
and murabaha and bai muajjal are for financing
sales. |
| Istisna
|
| A
contract of acquisition of goods by specification or order,
where the price is paid in advance, but the goods are manufactured
and delivered at a later date. |
| Ju'alal |
|
Lit:
stipulated price for performing any service. Technically
applied in the model of Islamic banking by some. Bank charges
and commission have been interpreted to be ju'ala by
the jurists and thus considered lawful.
Some
Islamic Banks give loans with service charge. The Council
of the Islamic Fiqh Academy established by the Organisation
of Islamic Conference in its third session held in Amman,
Jordan from 8 to 13 Safar 1407 H (11-16 October 1986), in
response to a query from the Islamic Development Bank has
resolved that it is permitted to charge a fee for loan related
service offered by an Islamic Bank. However, this fee should
be within actual expenditures and any fee in excess to actual
service related expenses is forbidden because it is considered
usurious. The service charge may be calculated accurately
only after a certain period when all administrative 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.
|
