Glossary of Terms

Definitions of the most commonly used terms in Islamic banking.

amanah: Trust, with associated meanings of trustworthiness, faithfulness and honesty. As an important secondary meaning, the term also identifies a transaction where one party keeps another's funds or property in trust.
gharar: Element of uncertainty and/or deceit
hibah: An act of transferring of ownership of an asset or usufruct without an exchange of counter value during the lifetime of the transferor
ijarah: A contract between a lessor and a lessee in which the lessor being the owner of the property allows the lessee to enjoy the usufructs of the property at agreed terms on the rental and period of lease.
ijmak: Consensus of Islamic scholars and jurist
Islamic banking: Financial services that meet the requirements of the Shariah, or Islamic law. While designed to meet the specific religious requirements of Muslim customers, Islamic banking is not restricted to Muslims: both the financial services provider and the customer can be non-Muslim as well as Muslim. Also called Islamic finance or Islamic financial services.
mudarabah: A partnership in profit whereby one party provides capital (rabb al mal) and the other party provides labour (mudharib)
mudarib: An entrepreneur
Murabaha: a sale on mutually agreed profit where the seller charges the buyer the cost plus a profit.
riba: Interest. The legal notion extends beyond just interest, but in simple terms riba covers any return of money on money - whether the interest is fixed or floating, simple or compounded, and at whatever the rate. Riba is strictly prohibited in the Islamic tradition.
Shariah: Islamic law as revealed in the Quran and through the example of Prophet Muhammad (PBUH). 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.
Shariah advisor: An independent professional, usually a classically trained Islamic legal scholar, that advises an Islamic bank on the compliance of its products and services with the Shariah, or Islamic law. While some Islamic banks consult individual Shariah advisors, most establish a committee of Shariah advisors (often known as a Shariah board or Shariah committee).
Shariah compliant: An act or activity that complies with the requirements of the Shariah, or Islamic law. The term is often used in the Islamic banking industry as a synonym for "Islamic" - for example, Shariah compliant financing or Shariah compliant investment.
ujrah: Service fee
wadiah: A safe keeping contract which is based on trust