Shariah RFP M1 key terms

A structured process of setting financial goals and choosing only Shariah-compliant means to reach them, covering budgeting, saving, investing, protection and estate matters within Islamic ethical limits.

The higher objectives of Islamic law, chiefly protecting religion, life, intellect, lineage and wealth. Planners use them to judge whether a financial strategy serves genuine welfare rather than mere accumulation.

Public benefit or welfare that Islamic law seeks to secure. In planning it justifies choosing between permitted options by weighing which better protects the client's family, wealth and long-term interests.

Any guaranteed increase charged for a loan of money, or an unequal exchange of the same commodity. It is prohibited, so planners avoid interest-bearing deposits, loans and bonds in client portfolios.

The riba arising from unequal exchange of the same type of commodity, such as trading gold for a larger weight of gold. It makes spot exchange in identical goods require equal quantity and immediate handover.

Excessive uncertainty in a contract's subject matter, price or outcome, such as selling a fish still in the water. Minor uncertainty is tolerated; excessive uncertainty invalidates the transaction.

Gambling or any arrangement where gain depends purely on chance and one party's loss funds another's win. It is prohibited, which excludes lotteries and speculative derivative wagers from planning.

A benevolent loan repaid in the same amount with no increase. It is the main Shariah-compliant way to help a client or relative with liquidity without creating an interest obligation.

A sale where the financier buys an asset and resells it to the client at a disclosed cost plus an agreed profit, payable by instalments. Used for property and goods finance instead of interest loans.

Leasing an asset to a client for a rental over a stated period, with the lessor retaining ownership and major maintenance obligations. Often paired with a transfer of ownership at maturity.

A partnership in which parties contribute capital and share profit by agreed ratio and loss by capital share. It underpins equity-based finance and joint property purchase arrangements.

A partnership where one party supplies capital and the other provides expertise and management, with profit shared by agreed ratio and monetary loss borne by the capital provider unless the manager was negligent.

A declining-balance partnership used for home finance, where the client gradually buys the financier's share while paying rent on the portion still owned by the financier.

An agency contract where one party acts on another's behalf for a fee or without charge. It is used for investment mandates, bill payments and takaful operator arrangements.

Certificates representing ownership in a tangible asset, project or usufruct, giving holders a share of the income it generates. They replace interest-bearing bonds in a compliant portfolio.

A rules-based test of whether a company or fund is permissible to invest in, checking business activity and financial ratios such as interest income and debt relative to total assets.

Cleansing investment returns by donating the portion traceable to impermissible income, such as interest earned by a screened company, so the client keeps only compliant profit.

An obligatory annual levy of 2.5 percent on qualifying wealth held for a lunar year above the nisab threshold, payable to specified categories of recipients. It is a core planning cash-flow item.

The minimum wealth threshold, commonly valued at 85 grams of gold or 595 grams of silver, above which zakat becomes due. Planners fix a valuation date to avoid confusion.

The lunar year that must elapse over zakatable wealth before zakat is payable. Planning calendars should track the client's chosen anniversary date each year.

Cooperative protection where participants contribute to a pooled fund used to compensate members who suffer defined losses, with surplus and risk shared rather than transferred to a commercial insurer.

A voluntary donation made by takaful participants into the risk pool, giving up any claim to that contribution. It is what makes mutual compensation permissible rather than a gharar sale.

A bequest in a will directing up to one third of the estate to non-heirs or charity. It supplements, but cannot override, the fixed inheritance shares.

The fixed Quranic inheritance shares allocated to specified heirs after debts and bequests are settled. Estate planning must respect these entitlements rather than redistribute them freely.

An endowment that permanently dedicates an asset or its income to a charitable or specified purpose, removing it from the donor's estate. It is a common legacy planning tool.

An ongoing charity whose benefit continues after the donor's death, such as a well, school or income-generating endowment. Planners use it to structure lasting charitable legacies.

The exchange of monetary values or currencies, which must be settled hand to hand when the currencies differ and in equal amounts when they are the same. It governs foreign currency planning.

Necessity that may temporarily permit an otherwise prohibited act to prevent serious harm, within strict limits. It is not a general excuse for convenience in investment choices.

Permissible under Islamic law. In planning, the term applies both to the source of income and to the activity or asset the money is put into.

Prohibited under Islamic law. Income or assets derived from prohibited activity must be excluded from a client's plan and, where received, cleansed.

A non-binding scholarly ruling on a point of Islamic law, issued in response to a question. Planners cite the fatwa of a recognised board when a product's compliance is disputed.

A panel of qualified scholars that reviews and approves financial products and issues compliance rulings. Its approval is a key due-diligence signal for planners comparing providers.

The risk that a product or process is later found non-compliant, or that compliance is lost through changing circumstances, exposing the client to income purification or unwinding costs.

Arranging a client's assets so that debts, bequests and inheritance shares are settled correctly and promptly after death, often using trusts, nominations and wills within Shariah limits.

An assessment of a client's willingness and capacity to bear investment loss, given goals and time horizon. It must be paired with Shariah constraints before recommending any allocation.

Mapping expected income and outgoings over time to fund goals, including zakat, takaful contributions and debt instalments. It is the base layer on which investment and estate plans sit.

Dividing a portfolio among permissible asset classes, such as sukuk, screened equities, property and cash, to balance risk and return while honouring Shariah limits.

The planner's duty to explain product features, fees, risks and any Shariah limitations in language the client understands, so consent is informed and documented.

A written document stating burial wishes, debts, bequests within one third and appointment of executors, prepared so the estate is distributed under Shariah rules without delay.