AAOIFI CPFAS key terms

A profit-sharing partnership in which one party supplies capital and the other contributes effort and management; profits are split by a pre-agreed ratio, while capital losses fall on the capital provider unless the manager was negligent.

A joint venture in which two or more parties contribute capital and share profits according to agreed ratios and losses in proportion to capital contributed.

A sale in which the seller discloses the cost of the asset and adds a stated profit margin, with payment typically deferred; the selling price is fixed at contract date.

A diminishing partnership in which one partner gradually buys out the other's share over time, commonly used for home and asset financing.

A lease contract transferring the right to use a specified asset for a stated period in return for rent, with the lessor retaining ownership and related major risks.

A lease that ends with transfer of the leased asset to the lessee, either by gift, nominal sale, or gradual transfer, structured so the lease remains distinct from the transfer.

A forward sale in which the buyer pays the full price in advance for a precisely described fungible commodity to be delivered at a future date.

A construction or manufacturing contract in which one party commissions another to build or produce a described asset, with payment terms and delivery milestones agreed in advance.

Investment certificates representing undivided ownership in tangible assets, usufruct, or a project, with returns derived from the underlying asset rather than from interest.

Any guaranteed increase or excess in a loan or exchange transaction that is not justified by a corresponding counter-value, prohibited under Shari'ah in both loans and sales.

An excess in the exchange of similar commodities of the same kind, such as unequal quantities of gold for gold, prohibited even when settlement is immediate.

Excessive uncertainty in the essential terms of a contract, such as the subject matter, price, or delivery, that makes the outcome unknowable and renders the transaction impermissible.

Gambling or speculative gain obtained purely by chance, where a party stakes wealth on an uncertain event; prohibited and distinguished from ordinary commercial risk.

A benevolent loan made without any stipulated return, where the borrower is obliged only to repay the principal amount borrowed.

The pre-agreed profit-sharing ratio in a partnership or investment account, expressed as a proportion of realized profit rather than as a fixed amount.

The party that supplies capital in a mudarabah or similar partnership, bearing the risk of capital loss absent misconduct by the managing partner.

The managing partner in a mudarabah who contributes expertise and effort, and who may share in profits but generally does not bear capital losses unless negligent.

An obligatory annual levy on qualifying wealth held for a lunar year above a minimum threshold, payable to specified categories of recipients.

The minimum threshold of wealth that makes a person liable to pay zakah, measured against specific standards such as gold or silver.

A sale contract whose subject matter, price, and delivery terms are known and permissible, free from riba, excessive uncertainty, and prohibited conditions.

A sale in which the price is settled at a later date, with the amount fixed at contract date and not increased for the delay.

A separate back-to-back salam contract in which the seller arranges to acquire goods from a third party to fulfill its delivery obligation under the first salam.

A second istisna contract entered into by the manufacturer with a subcontractor to produce the asset it has committed to deliver under the original istisna.

Depositors whose funds are invested on a mudarabah basis and who share in the resulting profits or losses according to agreed ratios.

An amount appropriated from gross investment profit, before allocating the mudarib share, to smooth returns paid to investment account holders over time.

An amount set aside from the profit share of investment account holders, after deducting the mudarib share, to absorb future losses on their investments.

The portion of realized profit allocated to the managing partner in a mudarabah, calculated according to the agreed profit-sharing ratio.

A financial statement reporting an entity's assets, liabilities, and equity at a specific date, prepared under the applicable Islamic financial reporting framework.

A financial statement presenting revenues, expenses, and other gains or losses for a period, including items recognized outside profit or loss.

A financial statement showing movements in equity during a period, including contributions, distributions, and transfers to reserves.

The requirement for an Islamic financial institution to disclose in its financial statements the amount of zakah attributable to the entity and information relevant to zakah on behalf of account holders.

The principle that restricted investment funds and other fiduciary funds must be accounted for separately from the institution's own funds and unrestricted investment accounts.

Investment accounts where the account holder imposes constraints on how the funds may be invested, limiting the institution's discretion over the assets.

An independent body of Shari'ah scholars appointed by an Islamic financial institution to review and supervise its compliance with Shari'ah rules and issue rulings.

The state of an institution's operations, products, and contracts conforming to Shari'ah rules as determined by its Shari'ah Supervisory Board and applicable standards.

An independent examination of an institution's activities and transactions to assess adherence to Shari'ah rulings and report findings to the Shari'ah Supervisory Board.

The obligation of an institution to act ethically toward society and the environment, including avoiding harm and contributing to community welfare, in line with Shari'ah values.

The state of being free from relationships or pressures that could compromise objective judgment, required of Shari'ah board members and external auditors.

An ethical obligation to avoid bias, conflict of interest, and undue influence in professional judgments and reporting.

The ethical duty to protect information obtained in a professional capacity and not disclose it without proper authority or legal obligation.

The ethical requirement to maintain the knowledge, skills, and diligence needed to perform professional duties to the expected standard.