Important Info
 Definition of Shariah Terms

Wadiah Yad Dhamanah

A contract between 2 parties i.e. the owner of goods and the custodian of goods to ensure the safe custody of the goods. The goods are protected from being stolen, lost, destroyed, etc. 'Goods' can refer to anything of value.

Mudharabah

An agreement made between a party who provides the capital and another, usually an entrepreneur, to enable the entrepreneur to carry out business projects. The agreement will be on a profit-sharing basis, according to a pre-determined ratio agreed upon earlier.

In the perspective of Islamic banking, the agreement could be between a depositor and the Bank (as the entrepreneur), or the Bank (as capital provider) and an entrepreneur. In case of losses, they are borne by the providers of funds.

Bai Bithaman Ajil

This contract refers to the sale of assets or goods on a deferred payment basis. Assets or goods requested by the Customer are bought by the Bank which subsequently sells it to the Customer at an agreed price which includes the Bank's mark-up profit. The Customer may be allowed to settle payment by instalments within a pre-agreed period, or in a lump sum.

Istisna

A contract of acquisition of assets by specification or order, where the price is paid in advance, but the assets are manufactured/constructed and delivered at a later date.

Ijarah

A contract where the benefits/use of an asset are transferred by the owner/lessor to the lessee at an agreed price/rental amount for an agreed period of time or lease period.

Ijarah Thumma Al-Bai

A type of lease which concludes with the option to buy-back in which the legal title of the leased asset will be passed to the lessee at the end of the lease period.

Murabahah

A sale contract between the Bank and its Customer for the sale of assets or goods at a price which includes a profit margin agreed by both parties. It involves the purchase of assets or goods by the Bank as requested by its Customer. The assets or goods are sold to the Customer with a mark-up profit. Payment, usually in instalments, is specified in the contract.

Wakalah

Refers to the nomination of a person by another to act on behalf or as his agent.

Kafalah

A surety given by one party who agrees to discharge a liability of a third party in case the third-party defaults in fulfilling his obligation.

Bai Dayn

The provision of financial resources required for production, commerce and services by way of sale/purchase of trade documents and papers.

Ujr

Refers to commission, fees or wages charged for services.