Top 50 Islamic Finance & Banking terms for every Islamic Finance Professional

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Serial Number	Term	Definition	Layman’s Explanation	Application
1	Shariah	Islamic law that governs all aspects of life.	Shariah principles guide financial transactions in a way that complies with Islamic ethics.	Ensuring financial products and investments are compliant with Shariah principles.
2	Mudarabah	A partnership where one party provides capital.	Like a business partnership, where one person invests money, and the other manages the business.	Investment partnerships that share profits between investors and entrepreneurs.
3	Musharakah	A joint venture partnership.	Similar to Mudarabah, but both parties invest capital and share profits and losses.	Used in business projects, where two or more parties collaborate and share both investment and risks.
4	Murabaha	Cost-plus financing, often used in trade.	It’s like buying something on credit with a known markup, which is agreed upon in advance.	Used in Islamic banking for financing purchases, where the bank buys the item and then sells it to the customer at a profit.
5	Ijarah	Leasing, where one party rents to another.	Like renting a house, but often used for assets like vehicles or equipment in Islamic finance.	Used for leasing assets in a Shariah-compliant manner, ensuring no interest is involved.
6	Sukuk	Islamic bonds that represent ownership.	Sukuk are like shares in an asset, such as real estate, and investors earn a share of the profits.	Used for raising capital for large projects while adhering to Shariah principles.
7	Takaful	Islamic insurance based on mutual cooperation.	Similar to regular insurance, but participants pool funds to support each other in times of need.	Providing insurance coverage for individuals or businesses while adhering to Islamic principles.
8	Riba	Usury or interest, prohibited in Islamic finance.	Riba refers to excessive or exploitative interest, which is forbidden in Islamic financial transactions.	Avoiding interest-based loans or investments to ensure compliance with Shariah.
9	Waqf	Charitable endowment, often for religious purposes.	Property or assets donated for a specific purpose, such as a school or mosque, benefiting the community.	Establishing and managing charitable foundations or trusts to support various causes.
10	Qard Hasan	Benevolent loan without interest.	A loan given to help someone in need, without expecting any extra amount in return.	Providing financial assistance to those in need without profiting from the loan.
11	Bai’ al-Inah	A sale and buyback arrangement.	An asset is sold at a markup and bought back at a lower price, effectively a form of interest.	Avoiding unethical financial transactions by ensuring the sale is genuine and not a disguised loan.
12	Bai’ Bithaman Ajil (BBA)	Deferred payment sale.	A sale where the buyer pays the price in installments, often with a known profit margin.	Used in Islamic banking for customers who need financing to purchase items like homes or vehicles.
13	Wadiah	Safekeeping or custody of deposits.	Banks hold deposits in trust and guarantee their safekeeping, often offering a small gift in return.	Protecting deposits and offering safekeeping services to account holders without involving interest.
14	Hawala	Informal money transfer system.	A trusted individual or network facilitates the transfer of funds between parties, often across borders.	Used for remittances and money transfers while avoiding conventional banking systems.
15	Bai’ al-Salam	Forward sale contract.	A contract where a buyer pays in advance for a future delivery of goods, often in agriculture.	Ensuring future supply and financing for agricultural products in a Shariah-compliant manner.
16	Bai’ al-Dayn	Debt trading, the sale of debt.	The buying and selling of debts, often used to expedite the collection of outstanding debts.	Facilitating the transfer of debt obligations in a way that adheres to Islamic principles.
17	Rahn	Pawning or collateral.	Providing an asset as collateral for a loan, with the collateral returned upon repayment.	Offering loans secured by collateral while complying with Shariah principles.
18	Gharar	Excessive uncertainty or ambiguity.	Avoiding excessive uncertainty or ambiguity in contracts and transactions, which can be problematic.	Ensuring clear and fair agreements in financial transactions to minimize disputes and risks.
19	Istisna	A contract for manufacturing or construction.	A contract where one party agrees to manufacture or construct a specific item for another.	Used for project financing, such as construction, where the item is created according to specifications.
20	Bai’ al-Murabahah	A contract for deferred payment.	Similar to Murabaha, but with a deferred payment arrangement, often used in trade and financing.	Facilitating trade and financing transactions with a known profit margin and deferred payments.
21	Istijrar	A contract for future purchases.	A long-term agreement where a buyer agrees to purchase specific goods or services from a seller.	Used for securing future supplies or services under predetermined terms, common in business contracts.
22	Kafalah	Suretyship or guarantee.	A guarantee provided by one party for the obligations of another, ensuring fulfillment of a contract.	Offering financial guarantees to support business agreements or contracts in accordance with Islamic principles.
23	Shirkah	A partnership or joint venture.	A partnership where two or more parties jointly invest and share profits and losses in a business.	Forming partnerships in business ventures while adhering to Shariah principles.
24	Wadi’ah	Safekeeping with no compensation.	Safekeeping or custody of an item without any compensation or reward, often used for trusts.	Holding assets or valuables in safekeeping for the benefit of others without expecting any compensation.
25	Bai’ al-Tawarruq	Third-party buying and selling.	A contract where a party buys an item with deferred payment and sells it to a third party for cash.	Used to raise funds through financial institutions by buying commodities and selling them to generate cash.
26	Bai’ al-Ujrah	A contract for services with a fee.	A contract where one party provides services in exchange for a fee, often used for professional services.	Engaging in service contracts while complying with Islamic finance principles.
27	Bai’ al-Qard	Loan without interest.	A loan provided without any additional interest or profit charged, typically for benevolent purposes.	Offering loans to individuals or businesses without interest, in line with Islamic finance principles.
28	Bai’ al-Arbun	Down payment in a sale.	A down payment made when purchasing an item, often used in property transactions.	Facilitating property transactions with a down payment to secure the deal while adhering to Islamic principles.
29	Bai’ al-Halal	Sale of permissible goods.	The sale of items that are permissible in Islam, ensuring the goods are lawful and ethical.	Engaging in ethical business transactions by selling lawful products or services.
30	Bai’ al-Haram	Sale of prohibited goods.	The sale of items that are forbidden in Islam, such as alcohol or pork, which is prohibited.	Avoiding transactions involving prohibited or unlawful goods in accordance with Islamic principles.
31	Bai’ al-Wafa’	Sale with the right to repurchase.	A sale where the seller has the option to buy back the item within a specified timeframe.	Offering a flexible arrangement for selling and repurchasing items in accordance with Islamic finance principles.
32	Bai’ al-Hasan	Benevolent or good sale.	A sale where the seller provides a favor to the buyer, often by selling at a price below market value.	Engaging in sales with goodwill or benevolence, offering favorable terms to the buyer.
33	Bai’ al-Muzayadah	Auction sale.	A sale where multiple buyers bid on an item, with the highest bidder winning the item.	Conducting auctions to sell items to the highest bidder while adhering to Islamic finance principles.
34	Bai’ al-Murabahah Bi al-Ajil	Deferred payment Murabaha.	A sale where the buyer pays a known markup in installments, similar to Bai’ Bithaman Ajil.	Facilitating deferred payment sales with a known profit margin in Islamic finance transactions.
35	Hibah	A gift or donation.	A voluntary gift given to another party without any obligation or expectation of return.	Providing gifts or donations to individuals or organizations in a charitable or benevolent manner.
36	Wadi’ah Yad Dhamanah	Safe custody with a guarantee.	Safekeeping with a guarantee of compensation in case of loss or damage, often for valuable items.	Offering secure storage services with a guarantee of compensation in case of unexpected loss or damage.
37	Hawala Bila Ta’jeel	Delayed transfer in Hawala.	A delayed transfer of funds in a Hawala transaction, where the recipient receives payment at a later date.	Facilitating cross-border money transfers with delayed payment while adhering to Islamic finance principles.
38	Wa’d	Promise or undertaking.	A commitment or promise to perform a specific action in the future, often used in Islamic finance contracts.	Providing assurances and commitments in financial agreements, ensuring transparency and trustworthiness.
39	Bai’ al-Tawliyah	Delayed payment sale.	A sale where the buyer pays the price over time, often used for deferred payment transactions.	Facilitating sales with delayed payments while adhering to Islamic finance principles.
40	Bai’ al-Sarf	Currency exchange.	The exchange of one currency for another at an agreed-upon rate, often used in international finance.	Conducting currency exchanges in accordance with Islamic finance principles, avoiding interest-based transactions.
41	Bai’ al-Mal	Sale of goods or assets.	The sale of physical goods or assets, such as vehicles or property, often used in trade and commerce.	Engaging in lawful sales of physical goods or assets while adhering to Islamic finance principles.
42	Ijarah Muntahia Bi Tamleek	Leasing with the option to purchase.	A leasing agreement where the lessee has the option to buy the leased asset at the end of the lease term.	Offering lease-to-own options for assets, providing flexibility to lessees while adhering to Islamic finance principles.
43	Ijarah Thumma Bai’	Leasing followed by sale.	A two-step transaction where an asset is leased and then sold to the lessee, often used in property transactions.	Facilitating property transactions with a leasing period followed by a sale, ensuring compliance with Islamic principles.
44	Qard	Loan or lending.	Lending money or assets to someone without any interest or profit expectation, often for charitable purposes.	Providing loans or lending support to individuals or organizations without interest or financial gain, in accordance with Islamic principles.
45	Bai’ al-Istijrar	Bulk purchase or continuous supply contract.	A contract for the continuous supply of goods, often used in industries requiring regular shipments.	Ensuring a continuous and steady supply of goods under a contract, facilitating long-term business relationships in accordance with Islamic finance principles.
46	Bai’ al-Mu’ajjal	Deferred payment sale.	A sale where the buyer pays the price at a later date, often with a known profit margin, used in trade and commerce.	Facilitating deferred payment transactions with known profit margins while adhering to Islamic finance principles.
47	Qirad	Investment partnership.	An investment partnership where one party provides capital, and the other manages the investment for profit.	Engaging in investment partnerships, allowing investors to contribute capital while others manage investments to generate returns, compliant with Islamic finance principles.
48	Bai’ al-Takjiri	Forward purchase contract.	A contract for the future purchase of goods at a specified price, often used to secure supply and pricing.	Ensuring future supply and pricing arrangements for goods, enabling businesses to plan effectively while adhering to Islamic finance principles.
49	Istisna’	Contract for future construction or manufacturing.	A contract where one party agrees to manufacture or construct a specific item for another, often used in project finance.	Facilitating project financing, ensuring the construction or manufacturing of a specified item under predetermined terms, in accordance with Islamic finance principles.
50	Bai’ al-Hawala	Sale by transfer of debt.	A sale where a debt obligation is transferred from one party to another, often used to expedite debt collection.	Facilitating the transfer of debt obligations in a way that adheres to Islamic finance principles and supports efficient deb

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