NIBAF Islamic Banking Certificate flashcards
NIBAF Islamic Banking Certificate · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Riba
- Any guaranteed increase on a loan of money or commodity, or unjustified excess in exchange; strictly prohibited in Islamic finance.
- Gharar
- Excessive uncertainty or ambiguity in a contract's essential elements (price, subject matter, delivery); renders contract invalid.
- Maqasid al-Shariah
- The higher objectives of Islamic law: preservation of religion, life, intellect, lineage, and wealth; guide ethical finance.
- Mudarabah
- Profit-sharing contract between capital provider (rabb al-mal) and entrepreneur (mudarib); profits shared by ratio, losses borne by capital provider unless negligence.
- Musharakah
- Joint partnership where partners contribute capital and share profits and losses proportionally to their capital shares.
- Murabaha
- Cost-plus sale where bank discloses cost and markup; payment deferred; bank must own and bear risk of asset before sale.
- Ijara
- Leasing contract where bank owns asset and leases its usufruct to customer for rental; ownership may transfer via separate gift.
- Salam
- Forward sale with full payment at contract for specified fungible goods delivered later; used in agriculture and manufacturing.
- Istisna
- Manufacturing contract where bank funds production of specified goods; payment can be in stages; subject matter must be precisely defined.
- Sukuk
- Asset-backed securities representing ownership in tangible assets or usufruct; returns derive from underlying asset performance, not interest.
- Shariah-compliant screening
- Filtering investments to exclude prohibited sectors (alcohol, gambling, conventional finance) and ensure financial ratios comply with Shariah.
- Investment Account Holders
- Customers who deposit funds under mudarabah; share profits and losses with bank; no guaranteed returns.
- Rate of return risk
- Risk of mismatch between profit rates on assets and liabilities, affecting investment account holders' returns and bank profitability.
- Shariah risk
- Risk of loss due to non-compliance with Shariah rules, leading to reputational damage and invalidation of contracts.
- Liquidity risk
- Risk of insufficient liquid assets to meet obligations; Islamic banks face limited access to conventional money markets.
- AAOIFI
- Accounting and Auditing Organization for Islamic Financial Institutions; issues Shariah, accounting, auditing, and governance standards.
- Shariah Supervisory Board
- Independent body of Shariah scholars that reviews and approves products and transactions to ensure compliance.
- Shariah audit
- Internal audit function that verifies compliance with Shariah rulings and reports findings to the Shariah Supervisory Board.
- IFSB
- Islamic Financial Services Board; issues prudential standards for capital adequacy, risk management, and governance of Islamic financial institutions.
- Basel III
- International capital and liquidity standards; adapted for Islamic banks by IFSB to address unique risks.
- Shariah governance framework
- Set of institutional arrangements ensuring Shariah compliance, including SSB, Shariah review, audit, and risk management.
- Qard Hasan
- Benevolent loan with no interest; borrower repays only principal; often used for welfare and financial inclusion.
- Wadiah
- Safekeeping contract where bank holds funds as trustee; may guarantee principal but cannot promise returns.
- Musharakah Mutanaqisah
- Diminishing partnership where customer gradually buys bank's share; rental decreases as ownership increases.
- Zakat
- Obligatory alms of 2.5% on qualifying wealth held for one lunar year; one of the five pillars of Islam.
- Takaful
- Islamic insurance based on mutual cooperation and donation; participants contribute to a pool to cover losses.
- Commodity murabaha
- Liquidity management tool where bank sells commodities on deferred payment to obtain cash; used for treasury operations.
- Profit-sharing ratio
- Pre-agreed proportion in which profits are distributed between parties in mudarabah or musharakah; must be agreed at contract.
- Late payment penalty
- Charge imposed on overdue payments; in Islamic finance, penalty amount is donated to charity, not treated as income.
- Ethical conduct
- Behaving with honesty, transparency, fairness, and avoiding exploitation in all financial dealings.
- Customer service
- Providing clear, accurate information about Shariah-compliant products and ensuring fair treatment of customers.
- Dispute resolution
- Processes for resolving complaints through internal review, mediation, or arbitration in a Shariah-compliant manner.