glossary and abbreviations - fitch...

Glossary and Abbreviations


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There is no standardised system for translating Arabic terms/words into English.

This text uses one spelling of Arabic words but there are others. For example, this book uses Sharia’a but readers may well find spellings such as Shariah, Sharia and Syariah in other texts; these are equally valid.

The examination will use the spellings given in this glossary.

Amanah

Refers to deposits in trust. A person can hold a property in trust for another, sometimes by express contract and sometimes by implication of a contract. Current accounts may be regarded as Amanah (trust).

Aqd’/A’qd

Contract, a bilateral obligation meriting financial consideration.

Aqidah

Islamic creed.

Aquila

Shared responsibility; the foundation of Islamic mutual insurance.

Arbun/Arboun/Urbun/Urboon

Down payment; a non-refundable deposit paid by a buyer retaining a right to confirm or cancel a sales contract.

Bai

Sale or exchange of goods and services.

Bai’ al-Inah

A contract which involves the sale and repurchase of assets between the same buyer and seller. A seller will sell the asset to a buyer on a cash basis. The seller will later buy back the same asset on a deferred payment basis where the price is higher than the cash price. This contract is rejected by most Islamic scholars.

Bai bi Thamin al Ajil (Bai’ Bithaman Ajil (BBA))

A deferred sales contract typically used for financing. When securitised in Malaysia it is call a BBA bond. In the Malaysian regulatory scheme, this is a long-term contract, with Murabaha being a short-term contract.

Batil

Invalid (contract).

Cedant

An insurance undertaking that transfers some of its risks and its premium income to a reinsurer.

Conventional bank

Used throughout this workbook, and throughout the industry, to identify banks that are not based on Islamic principles.

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Daman/Dhaman

A guarantee or security.

Fasid

Voidable (contract).

Fatwa (pl. Fatawa)

A legal pronouncement in Islam provided by an Islamic legal jurist.

Fiqh

The science of Islamic jurisprudence or Islamic law.

Fiqh al Muamalat

Islamic commercial jurisprudence or the rules of transacting in a Sharia’a-compliant manner.

Gharar

Any element of uncertainty in any business or contract which is otherwise preventable or avoidable.

Hadith (pl. Ahadith)

Words of the Prophet (PBUH), traditions. The narrative record of the sayings and actions of the Prophet Muhammad (PBUH).

Halal

Anything permitted by Sharia’a. Lawful; one of the five major Sharia’a categorisations of human acts.

Hamish Jeddiyah/Gedyyah

Security deposit, ‘earnest money’. An amount of money paid by the purchaser when giving an order, upon the request of the seller to make sure that the order giver is serious in his order of the asset. However, if the promise is binding and the purchase orderer declines to purchase the asset, the actual loss incurred to the seller is made good from this amount.

Hanafi

One of the Islamic schools of jurisprudence.

Hanbali

One of the Islamic schools of jurisprudence.

Haram

Anything prohibited by Sharia’a. Unlawful; one of the five major Sharia’a categorisations of human acts.

Hawala/Hawalah

Literally, it means transfer; legally, it is an agreement by which a debtor is freed from a debt by another person accepting to receive a transfer of the obligation, or the transfer of a claim of a debt by shifting the responsibility from one person to another – contract of assignment of debt. It also refers to the document by which the transfer takes place.


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Hiba/Hibah

Gift.

Ijara/Ijarah

Leasing. Sale of a definite Usufruct of any non-monetary asset in exchange for definite reward.

Ijara Mawsoofa Bil Thimma

A lease agreed upon, perhaps even with a deposit, for delivery and use of an asset in the future.

Ijara wa Iqtina/Ijarah-wal-Iqtina’

See Ijara Muntahia Bittamleek.

Ijma/Ijm’a

Consensus of all or a majority of the leading qualified jurists on a certain Sharia’a matter in a certain age.

Ijtihad

This refers to an endeavour (literally, toil) of a qualified jurist to derive or formulate a rule of law to determine the true application of Sharia’a in a matter on which the Holy Quran and the Sunnah are not explicit, and when a previous precedent for the issue at hand has not been set.

Illah

Underlying rationale.

Istihsan

Judicial preference for one legal analogy over another, usually to give preference for the public welfare.

Istisn’a

This is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. A manufacturer or builder agrees to produce or build a well-described good or building at a given price on a given date in the future. The price can be paid in instalments, step by step as agreed between the parties. Istisn’a can be used for providing the facility for financing the manufacture or construction of houses, plants, projects and building of bridges, roads and highways.

Jahala or Jahl

Ignorance, lack of knowledge; indefiniteness in a contract, sometimes leading to Gharar.

Khiyar al-shart

An option in a sale contract concluded at the time of signing the agreement, giving one of the two parties to the contract a right to cancel the sale within a stipulated time.

Lien

A charge, claim, hypothecation or mortgage pledging an asset to a creditor.

Manfa’a/Manfaa

Usufruct or benefit derived from an asset.

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Mawqoof

This is an unenforceable-until-authorised contract, where a person has the ability to enter into the contract but exceeds his authority; for example, where an agent exceeds the authority accorded to him by his principal. Such a contract is unenforceable until authorised by the principal.

Maysir

Speculation. Maysir is one of the fundamental prohibitions in Islamic finance and is one of the reasons that led to the design of a specific business model for Islamic insurance.

Muamalat

Interpersonal and intercommercial activities in accordance with Islamic law.

Mudaraba/Mudarabah/Mudharabah (Trust Financing)

This is an agreement made between two parties, one of whom usually provides 100% of the capital for a project and has no control over the management of the project; another party, known as a Mudarib, manages the project using his entrepreneurial skills. Profits arising from the project are distributed according to a predetermined ratio, and financial losses are borne by the provider of capital.

Mudaraba al Muqayyada

Restricted Mudaraba – applies when the agreement relates to a specific business or place and it is contractually limited by time, place, partner and deal type.

Mudaraba al Mutlaqa

Unrestricted Mudaraba – where the Mudarib is free to act within traditional Sharia’a parameters.

Mudarib

Mudarib manager in a Mudaraba contract. The Mudarib does not invest capital but provides skill and effort. The Mudarib is a co-investor in a bilateral Mudaraba.

Mugarasa

The rules of exchange governing certain forms of agricultural planting and harvesting.

Murabaha (Cost Plus Financing)

This is a contract sale between the bank and its client for the sale of goods at a price which includes a profit margin agreed by both parties. As a financing technique it involves the purchase of goods by the bank as requested by its client. The goods are sold to the client with an agreed mark-up.

Musharaka/Musharakah

This Islamic financing technique involves one or more parties who both provide capital towards the financing of a project or business. Both parties share profits on a pre-agreed ratio but losses are shared on the basis of contributed capital. Management of the project may be carried out by both the parties or by just one party. This is a very flexible arrangement where the sharing of the profits and management can be negotiated and pre-agreed by all parties.

Musharaka Muntahiya Bittamleek/Diminishing Musharaka or Musharaka Mutinaqisa

A form of partnership whereby one partner buys out the shares or units of the other according to a specific schedule.


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Muwaada

Two unilateral promises extended by two parties on the same subject matter.

Mua’hida

Two unilateral undertakings extended by two parties to do something in the future.

Naseeyah

Delay.

Off-balance sheet

An item not recognised for accounting purposes as being on the balance sheet.

Parallel Salam

A contract taken out to offset the delivery implications of the Salam contract.

Qard

The literal meaning is ‘to cut’. It is so called because the property is really cut off when it is lent to the borrower. Legally, Qard means to lend anything having value so that the borrower could avail himself of the same for his benefit with the condition that the same or similar amount of that thing will be paid back on demand or at the agreed time. Qard is generally meant to be benevolent, or non-commercial.

Qard Hassan

A form of loan identified in the Quran as a means of charity or helping others in need; an interest-free loan.

Qimar

Speculation.

Qiyas

Literally, this means measure, example, comparison or analogy. Technically, it means a derivation of a rule on the analogy of an existing law if the basis (Illah) of the two is the same. In the order of priority, it is the fourth tool of Islamic law.

Quran

Text of God, the primary source of Islamic jurisprudence. The Book of Divine Revelation that was delivered to humankind by the Prophet Muhammed (PBUH).

Rab al Mal

The party providing the finance – the investor.

Rahn

Pledge/mortgage.

Ras al Mal

Capital.

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Retakaful

Where a Takaful operator mitigates part of the risk associated with its Takaful funds by transferring part of the risk to another Takaful or a Retakaful operator.

Riba

An excess of, or increase in, interest. Technically, it means an increase over the principal in a loan transaction.

Riba al-Fadl (Riba al-Quran/Riba al-Jahiliyyah)

An exchange of similar commodities, defined as money or certain foods, in unequal amounts. Its prohibition is meant to close the door to Riba in lending.

Riba al Naseeyah/Riba Al-Nasiah (Riba Al-Quran and Riba Al-Jahiliyyah)

Riba Al-Nasiah or Riba of delay is due to an exchange of money today for more at a later date. Interest, in all modern banking transactions, qualifies as Riba Al-Nasiah.

Ribawi

Susceptible or containing Riba.

Ribawi commodities

Gold, silver, wheat, barley, dates, salt; anything which is used as money.

Sadaqat

Voluntary charitable donations.

Sahih

Valid (contract).

Salam

A contract for the purchase of a commodity for deferred delivery in exchange for immediate payment in full according to specified conditions.

Sarf

Literally, this means exchange. The rules of sarf restrict the methods of exchanging and depositing money in order to prevent Riba. These rules are based on the Hadith.

Securitisation

The conversion of assets into financial instruments, which may be sold in a manner that cuts the asset off from the seller, making it truly the property of the buyer of the financial instrument.

Sharia’a

Islamic canon law derived from primary sources, the Quran and the Hadith practice, and traditions of the Prophet Muhammed (PBUH).

Shirkah

An alternative term for Musharakah. A partnership or company.


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Shirkat al Aqd

Partnership by mutual agreed contract.

Shirkat al Milk

Partnership of two or more owners of a property held in common.

Sukuk

This is a document or certificate evidencing an undivided pro rata ownership of an underlying asset. Usually referred to as an Islamic bond.

Sunnah/Sunna

Custom, habit or way of life. Technically, it refers to the utterances of the Prophet Muhammad (PBUH) other than the Holy Quran known as Hadith, or his personal acts, or sayings of others, tacitly approved by the Prophet (PBUH).

Surat

Independent section of the Quran.

Tabarru’

A donation/gift the purpose of which is not commercial. Any benefit that is given by a person to another without getting anything in exchange is called Tabarru’. The concept of Tabarru’ has been applied within Takaful (Islamic insurance) schemes.

Takaful

A Sharia’a-compliant system of mutual protection, insurance, in which the participants donate part or all of their contributions to a common fund. These may be used to pay claims for damages suffered by any of the participants. The company’s role is restricted to managing the insurance operations and investing the insurance contributions.

Tawarruq

A form of reverse Murabaha which is tolerated as it involves three sales contracts and three independent parties, frequently used to deliver money to a person wishing to avoid borrowing at interest. Considered objectionable by most Muslim scholars.

Tenor

The term of the contract.

Ummah

The collective nation of Islamic states. The Islamic universal community.

Underlying asset

An asset which is the object of a contract, a specific Sukuk issuance, derivative, or guarantee.

Usufruct

The right to enjoy the benefit of property which is vested in another person.

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Usury

Excessive interest.

Usul al-fiqh

Sources of law.

Wa’d

Promise by one party regarding future actions.

Wadia/Wadiah

Safe custody, trust, deposits.

Wakala/Wakalah

A contract of agency in which one person appoints someone else to perform a certain task on his behalf, usually against a certain fee.

Wakil/Wakeel

Agent, representative for commercial purposes with a capacity similar to a power of attorney.

Waqf (pl. Awqaf)

Investments or properties which are charitable grants with infinite life, which may be used to support specific beneficiaries designated by the grantor.

Zakat/Zakah

A religious obligation of alms-giving on a Muslim to pay 2.5% of certain kinds of his wealth annually to one of the eight categories of needy Muslims. Literally, it means blessing, purification, increase, or cultivation of good deeds. In Sharia’a, it is an obligation to pay Zakat on wealth above a specified minimum for defined beneficiaries, as noted in the Quran.


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AAOIFI Accounting and Auditing Organisation for Islamic Financial Institutions.

AGMAnnual General Meeting.

AIICArab Islamic Insurance Company.

BBABritish Bankers Association.

BCBS Basel Committee for Banking Supervision.

BIMBBank Islam Malaysia Berhad.

BISBank for International Settlements.

BoEBank of England.

CBBCentral Bank of Bahrain.

CDSCredit Default Swap.

CIBAFI General Council for Islamic Banks and Financial Institutions.

CISCollective Investment Scheme.

DJIMDow Jones Islamic Market Index.

ETFExchange-Traded Fund.

FASFinancial Accounting Standard.

FSAFinancial Services Authority.

FTSEFinancial Times Stock Exchange.

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GAAPGenerally Accepted Accounting Principles.

GCCGulf Cooperation Council (Saudi Arabia, Kuwait, Bahrain, United Arab Emirates, Qatar, and Oman).

GIISGlobal Islamic Index Series.

IAHInvestment Account Holder.

IASInternational Accounting Standard.

IASBInternational Accounting Standards Board.

IsDB

Islamic Development Bank.

IFRSInternational Financial Reporting Standards.

IFSBIslamic Financial Services Board.

IIIslamic Insurance.

IIFMInternational Islamic Financial Market.

IILMInternational Islamic Liquidity Management (Corporation).

IIRAIslamic International Rating Agency.

IOSCOInternational Organisation of Securities Commissions.

IRRInvestment Risk Reserve.

IRTI Islamic Research and Training Institute.

ISDAInternational Swaps and Derivatives Association.


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JAFZJabal Ali Free Zone.

LIBORLondon InterBank Offered Rate.

LMELondon Metal Exchange.

MFIMicrofinance institution.

MSCIMorgan Stanley Capital International.

OCCOffice of the Comptroller of the Currency.

OECDOrganisation for Economic Cooperation and Development.

OICOrganisation of the Islamic Conference.

PBUHPeace Be Upon Him.

PERProfit Equalisation Reserve.

QFCQatar Financial Centre.

RIARestricted Investment Account.

RIAHRestricted Investment Account Holder.

RTGSReal-time Gross Settlement.

S&PStandard & Poor’s.

SECSecurities and Exchange Commission.

SPVSpecial Purpose Vehicle.

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SSBSharia’a Supervisory Board.

SWTPraise and Exaltation, short for the Arabic ‘subhanahu wa ta’ala’.

TNTechnical Note.

TORTerms of reference.

UIAUnrestricted Investment Account.

UIAHUnrestricted Investment Account Holder.

URECUnited Real Estate Company.

WBIWorld Bank Institute.

List of Arabic Terms

List of Arabic Terms

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The following terms used in the workbook and explained in the Glossary need to be known for the examination. Where pronunciation might not be evident, written guidance is given in the right hand column – although listening to Arabic speakers is strongly recommended.

Akhlaq

Amanah

A’qd/Aqd’ A’kd

Aqidah

Arbun A’r boon

Fatwa (Fatawa, plural)

Fiqh

Fiqh al Muamalat Fikh al Mu a’a malat

Gharar

Hadith (Ahadith, plural) Ha deeth (Aha deeth, plural)

Halal

Haram

Hawala

Ijara

Ijara Mawsoofa Bil Thimma

Ijara Muntahia Bitamleek/Ijara wa Iqtina I ja ra Mun ta hi a Bi tam leek/I ja ra wa Iq ti na

Ijma’

Ijtihad

Istisn’a Is tis n’a

Kafala

Maysir

Muamalat Mu a’a malat

Mudaraba/Mudarib Mu da ra ba/Mu da rib

Murabaha Mu ra ba ha

Musharaka/Musharik Mu sha ra ka/Mu sha rik

Parallel Salam

Qard Kard

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Qard Hassan Kard Ha ss an

Qimar

Qiyas

Quran Kor an

Rab al Mal (Arbab al Mal, plural) Rab al Mal (Ar bab al Mal, plural)

Rahn

Retakaful Re Ta ka ful

Riba Ri ba

Riba al-Fadl Ri ba al-Fadl

Riba al-Naseeyah Ri ba al - Na see ya h

Sadaqa (Sadaqat, plural) Sa da ka (Sa da kat, plural)

Salam

Sarf

Sharia’a Sha ri a’a

Sukuk Su kook

Sunnah Su nn ah

Tabarru’ Ta ba rro

Takaful Ta ka ful

Tawarruq Ta wa rruk

Wa’d

Wadia

Wakala Wa ka la

Wakil Wa keel

Waqf

Zakat Za kat

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