AAOIFI CPAAGE key terms

Any guaranteed increase or advantage charged for the mere extension of time on a loan, or an excess in exchange of like countervalues, which Shari'ah prohibits outright.

Excessive uncertainty in a contract's essential subject matter, price, or delivery, such that one party bears unknown risk that could void the transaction.

Gambling or speculative gain obtained purely by chance where a party's entitlement depends on an uncertain future event rather than productive activity.

A sale in which the institution discloses its cost and adds an agreed profit markup, usually payable on deferred terms by the customer.

A murabaha structure where the customer first promises to buy the asset after the institution acquires it and resells at cost plus markup.

A profit-sharing partnership where one party supplies capital and the other contributes effort and management, with losses borne by the capital provider absent misconduct.

A joint venture in which all partners contribute capital and share profits per agreement and losses in proportion to their capital contributions.

A declining co-ownership arrangement where the institution and customer jointly own an asset and the customer gradually buys out the institution's share.

A lease contract transferring the usufruct of a specified asset for an agreed rental over a stated period, with the lessor retaining ownership.

A lease ending in ownership transfer, where the lessee acquires the leased asset at the term's end through a separate sale or gift.

A forward sale where the buyer pays the full price in advance for a precisely specified fungible commodity to be delivered at a later date.

A contract commissioning the manufacture or construction of a defined asset, with payment made in installments tied to agreed stages of completion.

A back-to-back arrangement where the institution contracts as manufacturer with the customer and simultaneously as buyer with a subcontractor on matching terms.

Investment certificates representing undivided ownership in tangible assets, usufruct, or a project, whose returns derive from the underlying assets rather than debt.

A cooperative insurance arrangement in which participants contribute to a pooled fund used to indemnify members, managed by an operator for a fee.

A voluntary donation or contribution made by a participant into a takaful pool, intended to help fellow participants rather than to earn a return.

A benevolent interest-free loan repaid in the same amount, offered as a charitable accommodation and not as a profit-making facility.

A structure where a customer buys an asset on deferred payment then sells it to a third party for cash to obtain liquidity, subject to Shari'ah conditions.

An agency contract in which one party appoints another to act on its behalf in a defined matter, typically for a specified fee.

A guarantee whereby a third party undertakes to satisfy another's obligation to the beneficiary if the original obligor fails to perform.

A pledge of an asset as security for a debt, giving the creditor the right to recover from its value upon default, subject to Shari'ah conditions.

An obligatory annual levy on qualifying wealth held for a lunar year, payable to specified categories of recipients under Shari'ah.

The pre-agreed proportion in which profits are divided between capital provider and manager, expressed as a percentage and not tied to capital amounts.

The capital provider in a mudarabah who entrusts funds to the manager and bears the financial loss absent negligence or breach.

The right to use and enjoy an asset without owning it, which is the subject matter transferred in an ijarah lease.

An enforceable undertaking by one party to enter a future contract, permitted in certain structures to protect the institution from customer default.

A bankruptcy-remote entity established to hold underlying assets and issue certificates to investors, commonly used in sukuk securitization.

Describing a security whose value and returns derive from identified tangible or usufructuary assets rather than a pool of receivables or pure debt.

See diminishing musharakah: a co-ownership where one partner's share is progressively purchased by the other until sole ownership is achieved.

The set of concepts, recognition criteria, measurement bases, and disclosure requirements governing how Islamic financial institutions prepare their statements.

A report presenting an institution's assets, liabilities, equity, and off-balance-sheet items at a point in time under the applicable accounting standards.

A statement disclosing funds held and invested on behalf of customers, where the institution acts as agent and bears no ownership risk.

The organizational structures, policies, and processes ensuring an institution's operations comply with Shari'ah rulings, including oversight and review mechanisms.

An independent body of qualified scholars appointed to issue rulings, review transactions, and certify compliance of an institution's products and operations.

The state of an institution's products, contracts, and operations conforming to Shari'ah rulings as determined by its supervisory board.

An independent appraisal function within the institution that assesses adherence to Shari'ah rulings and reports findings to the supervisory board.

A systematic examination of records and transactions to confirm compliance with issued rulings and to identify any non-compliant income requiring purification.

The process of separating and disposing of income earned through non-compliant means by donating it to charity without benefit to the institution.

A formal opinion issued by qualified scholars resolving a Shari'ah question, which guides product design and operational decisions.

The ethical duty to protect client and institutional information from unauthorized disclosure, subject to legal and regulatory exceptions.

The ethical quality of honesty and consistency between stated values and actual conduct, forming the foundation of professional behavior.

The ethical obligation to make judgments free from bias, personal interest, or undue influence of others, supported by adequate evidence.

A situation where personal, financial, or other interests could improperly influence professional judgment, requiring disclosure and appropriate mitigation.

The ethical duty to maintain the knowledge, skills, and diligence required to perform services to the standard expected of a qualified practitioner.

The state of being free from relationships or interests that could compromise objectivity in assurance or review engagements.