Shariah RFP Module 2 key terms

The higher objectives of Islamic law, chiefly protecting religion, life, intellect, lineage, and wealth. Planners use them to judge whether a proposed structure serves rather than harms a client's welfare.

Any guaranteed increase or advantage stipulated in a loan, or an unjustified exchange imbalance in trade. Earning it is prohibited, so planners replace interest-bearing structures with profit-and-risk-sharing or lease-based ones.

Excessive uncertainty in the essential terms of a contract, such as price, object, or delivery. Minor uncertainty is tolerated, but material ambiguity can void a transaction and is avoided in product design.

Gambling or any arrangement where a participant stakes money on an uncertain outcome and one party's gain depends purely on another's loss. Conventional pure protection bets are often compared to it.

A contract formed by offer and acceptance between parties with legal capacity. Its validity depends on lawful subject matter, clear terms, and mutual consent free of coercion.

A sale in which the financier buys an asset and resells it to the client at a disclosed cost plus an agreed profit, usually paid in instalments. Ownership and risk must genuinely pass through the financier.

A lease of a specified asset or the hire of services for a stated period and rent. The lessor retains ownership and major maintenance obligations, distinguishing it from an interest-bearing loan.

A partnership in which each party contributes capital and shares profit by agreed ratio and loss by capital share. It suits project and property financing where genuine risk sharing is required.

An arrangement where one party supplies capital and the other supplies expertise and management, with profits split by agreed ratio. Financial loss falls on the capital provider unless the manager was negligent.

Agency in which one party acts on another's behalf for a defined task, often for a stated fee. Takaful operators and fund managers frequently use it as their operating contract.

A voluntary donation made without expectation of return. In takaful it is the mechanism by which participants contribute to a pooled fund used to pay claims to fellow participants.

Cooperative risk-sharing in which participants donate into a common pool that compensates members who suffer defined losses, managed by an operator for a fee or profit share.

Shariah-compliant reinsurance obtained by a takaful operator to protect the participants' risk fund against unusually large or catastrophic claims.

The sharing back to participants of any unused portion of the takaful risk fund after claims and reserves, typically on a basis disclosed in the policy documents.

Certificates representing undivided ownership in tangible assets, usufruct, or a project, paying returns derived from those underlying assets rather than from interest.

A rules-based filter that tests businesses and financial ratios, such as debt or interest income thresholds, to decide whether a security is permissible to hold.

Cleansing investment returns by donating the portion attributable to impermissible income, such as incidental interest, so the remaining profit is lawful to keep.

The framework of oversight, policies, and reporting through which an institution assures that its products and conduct comply with Shariah rulings issued by its supervisory board.

A reasoned ruling on a point of Islamic law issued by a qualified scholar. In finance it authorises a specific product structure and its conditions of use.

The minimum threshold of wealth above which zakat becomes due, set at a value based on gold or silver and reviewed against current prices.

The completion of one lunar year of ownership over zakatable wealth. It determines the point at which the annual zakat obligation is calculated and paid.

An obligatory annual charge on qualifying wealth held by a Muslim, payable at set rates to specified categories of recipients. It is a worship obligation, not a discretionary charity.

A fixed per-person payment due before the Eid prayer ending Ramadan, owed by every Muslim who has food in excess of need, on behalf of each household member.

One of the eight categories of zakat recipients: those appointed to collect, administer, and distribute zakat funds on behalf of the community.

A bequest directing that up to one-third of the estate be given to non-heirs or to charity after debts are settled. Anything beyond one-third requires heirs' consent.

The fixed shares of inheritance prescribed for specified relatives, applied after funeral costs, debts, and valid bequests are settled. Residuary heirs take what remains.

An endowment that permanently dedicates property or its income to a charitable or specified purpose, removing it from the donor's estate and from ordinary sale.

An unconditional gift of property made during the donor's lifetime, transferring ownership immediately and thereby reducing the estate subject to inheritance rules.

A testamentary document drafted so that bequests stay within the one-third limit, debts and zakat dues are settled first, and distribution follows the prescribed inheritance shares.

A pension or savings vehicle invested only in permissible assets, screened and purified of impermissible income, and structured so returns come from shared risk rather than guaranteed interest.

A retirement payout design that avoids guaranteeing a fixed return on a loan, instead using shared investment accounts, unit-linked drawdown, or takaful-based arrangements.

Consideration of public benefit or necessity used to permit a structure where strict analogy would cause hardship, provided no clear prohibition is breached.

Permissible under Islamic law. In financial planning the term covers both the assets a client may hold and the income sources that fund their plan.

A benevolent loan repaid in the same amount with no stipulated increase, used for welfare purposes and sometimes to cover short-term takaful fund deficits.

The discovery stage that records a client's assets, debts, family structure, zakat position, and religious preferences so recommendations satisfy both needs and Shariah constraints.

An independent periodic review testing whether an institution's actual transactions, documentation, and disclosures conform to the rulings issued by its Shariah supervisory board.