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		<p><font size="3" face="Arial"><b></b>REFERENCE: A Glossary Of Islamic Finance Terms </font></p>
		<p><font size="2" face="Arial">Chris Hamblin</font></p>
		<p><font size="2" face="Arial">Compliance Matters </font></p>
		<p><font size="2" face="Arial">20 December  2013</font></p>
		<p><font size="2" face="Arial"><p>Islamic finance is an area about which this news service
writes given the importance and economic muscle of certain Muslim jurisdictions
and the wealth of an affluent Muslim population around the world. For those who
are unfamiliar with the topic, many of the terms used in the field need to be
explained and spelled out. In the following item, here is a handy glossary that
we hope readers find useful. </p>
<p>Bank Negara Malaysia  is issuing a series of policy documents or &quot;exposure drafts&quot; on Shariah contracts to facilitate end-to-end compliance with Shariah law. In doing so, it has inadvertently given the Anglo-Saxon world a first-class glossary of Islamic banking terms as interpreted by a conventional banking regulator. Private banks and asset-management firms that deal with Islamic banks - whose due diligence tends to leave much to be desired - are likely to need such a glossary, the terms and definitions of which we list here. All items below are from the bank's recent exposure drafts, for which it has invited written comments from the regulated community. The deadline for replies is 10 January 2014. Whenever two definitions clash, we include both.</p>
<p>The terms: </p>
<p>Mudarabah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Profit-sharing
contract. OR...</p>
<p>A contract between a capital provider  and</p>
<p>an entrepreneur  under which the rabbul mal
provides capital to be managed by the mudarib and any profit generated from the
capital is shared between the rabbul mal and mudarib according to mutually
agreed profit-sharing ratio  whilst financial losses are borne by the
rabbul mal provided that such losses are not due to the mudarib’s misconduct
, negligence  or breach of specified terms .</p>
<p>Mudarib&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
entrepreneur in a mudarabah venture.</p>
<p>Mukhalafah al-shurut&nbsp; Breach
of terms and conditions.</p>
<p>Mukhalafah al-quyud&nbsp; Breach
of restrictions</p>
<p>Muqassah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Offsetting.</p>
<p>Murabahah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Contract
a sale and purchase of an asset where the acquisition cost and the mark-up are
disclosed to the purchaser. OR... A sale and purchase of an asset where the
acquisition cost and the mark-up are disclosed to the purchaser.</p>
<p>Musawamah&nbsp;&nbsp;&nbsp; Sale contract without the
disclosure of the asset cost price and profit margin to the buyer.</p>
<p>Musharakah&nbsp;&nbsp;&nbsp;&nbsp; Profit-and-loss-sharing
contract.</p>
<p>Musharakah Mutanaqisah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; An
arrangement entered into by two or more parties on a particular asset or
venture which allows one of the partners to gradually acquire the shareholding
of the other partner through an agreed redemption method during the tenure of
the contract.</p>
<p>Mudi`&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Safekeeping
depositor.</p>
<p>Muqassah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Offsetting.</p>
<p>Mahal al-sharikah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Musharakah
venture</p>
<p>Muwakkil&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Principal</p>
<p>Makful `anhu&nbsp; The
guaranteed party is a debtor or a party</p>
<p>guaranteed by the guarantor.</p>
<p>Makful lahu&nbsp;&nbsp;&nbsp;&nbsp; The
beneficiary is a creditor or a party who has the right to claim the liability
 from the guaranteed party  or the guarantor .</p>
<p>Ma ya’ul ila luzum&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A
debt that will become legally binding in the future.</p>
<p>Qabd haqiqi&nbsp;&nbsp;&nbsp; Taking
physical possession. It refers to a state where a person has taken actual
possession and the rights to control an asset.</p>
<p>Qabd hukmi&nbsp;&nbsp;&nbsp; Taking
constructive possession. It refers to a state where a person has not taken
actual possession but has the legal right to control an asset.</p>
<p>Qard&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A
contract of lending a fungible asset to a party who will benefit from it and
who will subsequently return an equivalent replacement. OR...loan contract.</p>
<p>Rahn&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pledge/Charge.</p>
<p>Riba&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any
excess compensation without any corresponding counter-value recognised by
Shariah.</p>
<pb>
<p>Ribawi asset&nbsp;&nbsp;&nbsp; Assets
which are subject to specific rules in sales to avoid the implication of riba.
These assets consist of six  types and are classified into two 
categories:</p>
<p> Medium of exchange  represented by gold and
silver and any items used as currency; and</p>
<p> Staple food represented by wheat, barley, dates, and
salts.</p>
<p>If an exchange involves the same type of asset such as gold
for gold or wheat for wheat, then it must be of equal counter-value and on spot
basis. If the exchange involves assets of different type but within the same
category such as the exchange of gold for paper currency, then it has to be
done on spot basis.</p>
<p>Rabbul mal&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Capital
provider.</p>
<p>Salam&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A
contract in which advance payment is made for an asset to be delivered at a
future date.</p>
<p>Takaful&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; An
arrangement based on mutual assistance under which takaful participants agree
to contribute to a common fund providing for mutual financial benefits payable
to the takaful participants or their beneficiaries upon the occurrence of
pre-agreed events</p>
<p>Ta`addi&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Misconduct.</p>
<p>Takhliyah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Relinquishing
or abandoning the rights of ownership.</p>
<p>Taqsir&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Negligence.</p>
<p>Tamkin&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Enabling
the person who has the ownership of an asset transferred to him to make full
use and assume liability of the asset.</p>
<p>Tawarruq&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; An
arrangement that involves sale of in which an asset to the purchaser is
purchased with on a deferred basis, and subsequently subsequent sale of the
asset sold to a third party on spot a cash basis to obtain cash or vice versa.
OR...</p>
<p>Purchasing an asset with a deferred price, either on the
basis of musawamah or murabahah, and subsequently selling it to a third party
to obtain cash.</p>
<p>Tawliyah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Sale of a good at its
cost price.</p>
<p>Ta`widh&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Compensation.</p>
<p>Tasarruf fuduli&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unauthorized
transaction</p>
<p>`Urf&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Customary
practice.</p>
<p>`Urf tijari&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common
business practice which is accepted by the community and does not contradict
Shariah rulings.</p>
<p>`Urbun&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Earnest
money paid to secure purchase of an asset in an exchange contract which is
considered part of the price if the buyer decides to continue the contract and
is not refundable.</p>
<p>`Urf tijari&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common
business practice which is acceptable by the community and does not contradict
the Shariah rulings.</p>
<p>Wa`d&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; An
expression of commitment given by one party to another to perform certain
action in the future. OR...promise or commitment or pledge or covenant.</p>
<p>Wakalah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A
contract in which a party  authorises another party as his agent
 to perform a particular task in matters that may be delegated, either
voluntarily or with imposition of fee.</p>
<p>Wadi`&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Custodian.</p>
<p>Wadi`ah yad amanah&nbsp; Safekeeping
based on trusteeship.</p>
<p>Wadi`ah yad dhamanah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Safekeeping
based on guarantee.</p>
<p>Wasi&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Nominee.</p>
<p>Wakalah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Agency
contract</p>
<p>Wakalah bi al-istithmar&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Agency
contract for investment</p>
<p>Wakalah bi ujrah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fee
based agency</p>
<p>Wakalah muqayyadah Restricted
agency</p>
<p>Wakalah mutlaqah&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrestricted
agency</p>
<p>Wakil&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Agent</p></pb></font></p>
		
		
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