Saturday 16 May 2009

Islamic/Shariah Investment Terms (Definitions courtesy of UK Islamic Finance Council)

The language:

Fatwa: A ruling made by a competent Sharia scholar on a particular issue where fiqh (Islamic jurisprudence) is unclear. It is an opinion, and is not legally binding.

Halal: Activities thaty are permissible according to Sharia. In Islam there are activities, professions, contracts and transactions that are explicitly prohibited (haram) by the Quran or Sunnah. Barring those designated as haram all other activities, professions, contracts etc are halal.

Riba: Usually riba and interest are used interchangeably. Riba, in all forms, is prohibited in Islam.

Tabarru: A donation covenant in which the participants agree to mutually help each other by contributing financially.

Salam: A contract in which advance payment is made for goods to be delivered at a later date.

Shirkah: A contract between two of more people who launch a business or financial enterprise to make a profit.

Sukuk: Similar to a conventional bond, with the key difference being thatthey are backed by an asset. The asset will be leased to the client to yield the return on the sukuk.


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