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Glossary
::	Islamic Finance Overview
::	Primary Sources
::	Secondary Sources
::	Basic Economic Principles
::	Commonly used terms
::	General Prohibitions

Training & Education

Islamic Banking, Finance & management courses

Advanced programmes with an international market exposure

Training Programmes & Courses on Islamic Banking & Finance

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Advisory & Consultancy

	Consultancy on establishing Islamic products and services
	Advise on areas relating to Islamic Banking & Finance
	Project management & Product Development
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research & development

	Research in areas relating to Islamic Finance
	Development of Sharia’h operating models
	Development of Sharia’h accounting standards
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Islamic financial terminology

Islamic Banking refers to a system of banking or banking activity that is consistent with Shari'aor Islamic law.

Shari'a:meaning the Way or the Path - Commonly known as Islamic Law.

Primary sources

The Qura'an:
Sets the framework on Islamic finance and economics. About 70- 100 verses concerning business relationships

The Sunnah:
The Acts and Sayings of the Prophet PBUH -A large wealth of prohibitions and recommendations. The backbone of contracts -Found in 6 main collections

Secondary sources

The Fiqh - Scholarly Interpretations in History
The largest body of contract law. Open to interpretation and dispute.

Four (4) main schools of thought (all Sunni Schools):

	Hanafi (Pakistan,...)
	Shafii (Far East)
	Maliki (North Africa,...)
	Hanbali (Saudi,...)

Ijma - Community Consensus

Ijtihad - Personal Judgement

Qiyas - Reasoning and Debate (Shari'a Scholars)

Basic Economic Principles

Prohibition on Riba (interest):
Shari'a regards money as simply a means of exchange, without intrinsic or inherent value, and holds that money cannot be used to make money. Interest is the classic example of Riba. Payment or receipt of interest is therefore strictly prohibited.

However, profit and loss sharing arrangements are considered acceptable provided there is real risk sharing.

Interest of any kind, also read as economic injustice, more precisely, any financial situation leading to the possibility of economic injustice in society.

Prohibition on Gharar (risk):
A transaction should be free of gharar- undefined risk, uncertainty or speculation

Contracting parties must know the subject matter of the contract, the price and the effect of entering into the contract

A contract will be unacceptable if there is an obligation that is conditional on the occurrence of an uncertain or ill-defined event outside the control of the parties

Conditionality:
Under the Shari'a, there is a general prohibition on making one contract conditional upon another contract.

Prohibition on Maisir (speculation):
Shari'a prohibits and treats as void transactions that rely on chance or speculation, rather than effort, to produce a return. This can create problems in relation to contracts that are seen as tantamount to gambling, which includes some conventional derivative transactions such as swaps, futures and options. Alcohol, pork products, gambling, arms & ammunition and the associated products and services are totally prohibited.

Commonly Used Terms

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P |
Q | R | S | T | U | V | W | X | Y | Z

Aqd (Contract) - from the Arabic "KNOT"

Arboon (Option Sale) - A sale of goods present with the seller throughout period, where buyer pays down-payment to reserve goods. Buyer may choose to not complete second instalment

Bai bithaman al-ajil - Deferred Payment Sale

Bai bittaqsit - Instalment sale

Ijara (Leasing) - A contract under which a person buys and leases out for a rental fee equipment required by its client. The duration of the lease and rental fees are agreed in advance. Ownership of the equipment remains in the hands of the bank (as does responsibility for maintenance)

Ijara wa-iqtina (Lease/hire purchase) - Very similar to ijara, except that there is a commitment from the client to buy the equipment and the end of the rental period. It is pre-agreed that at the end of the lease period the client will buy the equipment at an agreed price from the bank, with rental fees previously paid constituting part of the price

Istisna (Manufacturing Sale) - A contract of acquisition of goods by specification or order, where the price is paid progressively in accordance with the progress of a job completion. This is practiced, for example, for purchases of the houses to be constructed where the payments made to the developer or builder are according to the stage of work completed

Murabaha (cost-plus sale/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 the client. The goods are sold to the client with a mark-up

Mudaraba (Trust financing - silent partnership) - This is an agreement made between two parties: one which provides 100% of the capital for the project and another party known as the mudarib, who manages the project using his entrepreneurial skills. Profits arising from the project are distributed according to a pre-determined ratio. Any losses accruing are borne by the provider of the capital.

Musharaka (Partnership financing) - This Islamic financing technique involves a partnership between two parties who both provide capital towards the financing of a project. Both parties share profits on a pre-agreed ratio, but losses are shared on the basis of equity participation. Management of the project may be carried out by both parties or by just one party. This is a very flexible partnership arrangement where the sharing of the profits and management can be negotiated and pre-agreed by all parties

Qirad - Another word for Mudarabah (See Mudarabah)

Qard (Loan) - Loans must be made free of charge, borrower may use loan and can guarantee value

Rahn (Collateral) - Taker of Collateral can not use the good nor receive any of its benefits

Salam (Pre-Paid) - Contract of sale of good, where the price is paid in advance and the goods are delivered in the future

Sukuk (Certificate) - The common usage for an Islamic Bond

Wad (Promise) - A unilateral undertaking without consideration

Wadi'a (Deposit) - Generally, The party taking a deposit of a good does not guarantee, nor can it benefit from the good

Wakala - Agency Contract

Wakil - Agent

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General Prohibitions

	Any benefit arising out of any act of lending is illegal
	A contract between parties must have a consideration, one side of the contract must be made immediately.
	Currencies can only be traded for spot delivery. Gold and Silver are currencies and must be traded as such. Specific food items can only be traded against each other for spot delivery - however Scholars views differ on this
	Partnerships and Profit from partnership do not have to be proportionate, but losses must be shared proportionately.
	Collateral must not be used by lender, all benefits until outcome is decided is for the borrower

General prohibition i

	Islamic Contract Law regulates the financial obligation between parties when transacting in Goods and Services
	Goods and Services must have a price, which is contracted by the use of the Medium of Exchange, Money. Therefore, Money (Unless in cases of FX spot exchange) can not be priced itself, can not be bought, its relevance is only as a medium of exchange between goods and services
	Any loan that creates a benefit is Riba (please consult commonly used terms)
	You can lend cash, but can only receive capital back
	If you earn interest, you can't use it. Can not use interest earned for Zakat

General prohibition ii

	This prohibition reflects the nature, timing, quantity, and quality of goods versus currency and is reflected in one of the most important of the Prophet's sayings: "Gold for Gold, Silver for Silver, Wheat for Wheat, Barley for Barley, Dates for Dates, Salt for Salt, hand to hand in equal measures. If types differ, then sell as you wish but hand to hand" Notice that only if types differ; Type is not genus, Gold and Wheat are different types but also different genus, and therefore, spot rule doesn't apply, one leg, either currency or good can be deferred.

General prohibition iii

	An agreement between 2 parties is a contract and a contract must have consideration.
	The Prophet PBUH forbade the contracting of 2 non-present items, one must be delivered immediately
	Goods can be purchased on deferred payment when goods are delivered spot (Murabaha)
	Goods can be delivered at a later date if paid for immediately (Salam)
	Some exceptions are Ijara, Istisna, and Arboon (please consult commonly used terms)

news & Events

	IBFC is dedicated to working with Private & Public organisations in UK, Europe & Middle East to offer expert knowledge and training in Islamic Banking and Financial Sector
	Established in partnership with IBFIM - Islamic Banking & Finance Institute in Malaysia
	Collaboration with Cardiff University - Business School and Centre of Islam
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IBFC bridges the gap between specialist Academic Institutions and Financial Organisations aspiring to offer
Islamic Banking courses or products by offering specific Financial Training Courses and Consultancy based on
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