AlBaraka home page
 
  
CALL UAN: 111-742-742 
 
   
 
 

 

SITE MAP

 
 


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. 

Disclaimer notice.
Copyright © 2001-2005 AlBaraka Islamic Bank
All rights reserved.