The contracts, in English.

22 of 22 terms

• Riba

  ربا

  A stipulated increase on a loan, or surplus in certain exchanges.

  The core prohibition this guide is built on. Bank interest is the modern form of riba al-nasi’ah. See the riba guide before anything else.

• Gharar

  غرر

  Excessive uncertainty in a contract.

  A sale of “whatever is in my hand” or an insurance payout that may never happen. Minor unknown details are tolerated; making uncertainty the product is not.

• Maysir / qimar

  ميسر

  Gambling — gain by chance at another’s expense.

  Sports betting, casino games, Premium Bonds, and many prediction markets. Speculation on a real asset is not automatically maysir; a zero-sum bet is.

• Murabaha

  مرابحة

  Cost-plus sale with a disclosed markup.

  The bank or seller must own the asset, disclose cost, and sell at a known profit. If they never own it, it is a loan. Used for cars, goods, and sometimes cash via commodities.

• Ijara

  إجارة

  A lease of a real asset.

  Rent is for usage of something the lessor still owns. Maintenance of the corpus sits with the owner. A hire-purchase that is a loan in the documents is not ijara.

• Musharakah

  مشاركة

  Equity partnership: profit by agreement, loss by capital.

  Diminishing musharakah is the usual UK home-purchase structure: you buy the bank’s share down over time and pay rent on what they still hold.

• Mudaraba

  مضاربة

  One partner funds, the other works.

  Profit split as agreed. Loss of capital falls on the funder unless the worker was negligent. Islamic funds and some savings products use this or wakala.

• Wakala

  وكالة

  Agency: someone invests or buys for you for a fee.

  UK Islamic savings often use wakala. The expected profit rate is a forecast, not a debt coupon. The agent should not quietly guarantee it with interest income.

• Tawarruq

  تورق

  Buying on credit and selling for spot cash to monetise.

  The engine behind many “Islamic personal loans”. Organized tawarruq on the commodity desk is permitted by some Shariah boards and rejected by others as riba with extra paperwork.

• Sukuk

  صكوك

  Certificates of ownership in an asset or project.

  Not a bond with an Arabic name when they work. You should have a claim on an asset or usufruct, and returns should follow that asset. “Asset-based” with a purchase undertaking that rebuilds a fixed coupon deserves a closer read.

• Takaful

  تكافل

  Mutual risk pool funded by donation, run for a fee.

  The Islamic alternative to insurance. Retail supply in the UK is thin; legally required conventional cover is usually argued under necessity.

• Zakat

  زكاة

  2.5% of qualifying wealth above nisab each lunar year.

  A worship, not a tip. Categories of who can receive it are fixed. Purification of investment income is a separate gift.

• Nisab

  نصاب

  The zakat threshold: 87.48g gold or 612.36g silver.

  Silver nisab is much lower in pounds today, so it catches more people. Many UK calculators default to gold for cash wealth. Be consistent.

• Hawl

  حول

  One lunar year of holding above nisab.

  A common practice is to fix an annual zakat date rather than tracking every deposit’s anniversary.

• Qard hasan

  قرض حسن

  A benevolent loan: you get back only the principal.

  The only loan that is clean. A “service fee” that tracks time or balance is interest in costume.

• Wadiah

  وديعة

  Safekeeping. The bank holds your money as a trust or a guaranteed deposit.

  Current accounts are often analysed as wadiah or qard. A gift (hibah) the bank may give cannot be contractually promised as a rate.

• Istisna

  استصناع

  A contract to manufacture or build something specified.

  Used for construction finance. The subject does not exist yet, which is why the rules are tighter than a spot sale.

• Salam

  سلم

  Prepaid purchase of described goods for later delivery.

  Classical agricultural finance. Full price now, specified goods later. Not a back door to selling what you do not own in general trade.

• AAOIFI

  The main standard-setter for Islamic financial institutions.

  Accounting and Auditing Organization for Islamic Financial Institutions, based in Bahrain. Their Shariah standards are what most Gulf and many UK Islamic banks cite. They are institutional standards, not the only school of law.

• Darura

  ضرورة

  Necessity that can lift a prohibition to the extent of the need.

  Car insurance, some employment pensions, and (on one view) student finance are argued here. Darura is not “I preferred the cheaper mortgage”. It shrinks when a lawful alternative appears.

• Hibah

  هبة

  A gift. Banks sometimes give hibah on wadiah accounts.

  A gift that is advertised as an annual rate and expected in practice is a coupon. A true gift is discretionary.

• Ujrah

  أجرة

  A fee for a service.

  Card facilities and wakala can be priced as ujrah. A fee that is really interest on drawn cash will be judged on substance.