Understanding Islamic Finance - Doha Academy of Tertiary Studies

Glossary 487Bai‘ bil Wafa: Sale with a right of the seller to repurchase (redeem) the property by refunding thepurchase price – basically a pledge; treats the sold asset as collateral until the amount is paid backby the other party to sale; not permissible if the resale of the property to the original seller is made acondition for the initial sale.Bai‘ Mu´ajjal: Literally, a credit sale. Technically, a financing technique adopted by Islamic banks; itis a contract in which the seller allows the buyer to pay the price of a commodity at a future date in alump sum or in instalments. The price fixed for the commodity in such a transaction can be the sameas the spot price or higher or lower than the spot price, but generally it is higher than the spot price.Bai‘ Murabaha: Sale at cost price plus a mutually agreed profit – bargaining on profit margin on thecost price. (See Murabaha)Bai‘ Musawamah: Sale without any reference to the cost price to the seller – bargaining on price.Bai‘ Salam: A contract in which advance payment is made for goods to be delivered later on. Theseller undertakes to supply some specific goods to the buyer at a future date in exchange of an advanceprice fully paid at the time of the contract. According to normal rules of the Sharī´ah, no sale canbe executed unless the goods are in existence at the time of the bargain, but Salam sale forms anexception given by the holy Prophet himself to the general rule, provided the goods and their pricesare defined and the date of delivery is fixed. It is necessary that the quality of the commodity intendedto be purchased is fully specified, leaving no ambiguity leading to dispute. The objects of this saleare goods and not media of exchange like gold, silver or currencies, because these are regarded asmonetary values, the exchange of which is covered under the rules of Bai‘ al Sarf, i.e. hand to handwithout delay. Barring this, Bai‘ Salam covers almost everything which is capable of being definitelydescribed as to quantity, quality and workmanship, subject to the fulfilment of other conditions forvalid Salam.Bai‘ Tawliyah: Sale at cost price – to facilitate or serve others.Bai‘ Wadhi‘ah: Sale with loss – at a price less than the cost price.Bai‘ wal Salaf: A conditional contract combining selling and lending, like one man saying to another:“I purchase your goods for such and such if you lend me such and such” – invalid.Barnāmaj: Catalogue or list of contents in a sale consignment.Bayt al Māl: Public treasury of an Islamic State.Buyoo‘al Amānāt: Fiduciary sales like Murabaha, Tawliyah and Wadhi‘ah.Dayn: Debt; goods of indeterminate category that can be used for payment of liabilities; a liabilityto pay which results from any credit transaction like purchase/sale on credit or due rentals in Ijarah(leasing). A Dayn comes into existence as a result of any other contract or credit transaction.Dhamān: Taking liability, responsibility – contract of guarantee; responsibility ofentrepreneur/manager of a business.Dhamān Khatr al-Tariq: An arrangement of mutual assistance in which losses suffered by tradersduring journeys due to hazards on trade routes were indemnified from jointly pooled funds.Dinar: Currency in the form of gold coins that was prevalent in the past.Dirham: Currency in the form of silver coins prevalent in the past.Falah: Welfare in this world and the Hereafter; Falah means to thrive, to become happy or to haveluck and success. Technically, it implies success both in this world and in the Akhirah (Hereafter).The Falah presumes belief in one God, the apostlehood of Prophet Muhammad (pbuh), Akhirah andconformity to the Sharī´ah in behaviour.