Understanding Islamic Finance - Doha Academy of Tertiary Studies

Glossary 489Hukmi (Qabza): Constructive possession; a situation in which the buyer has not taken the physicaldelivery of the commodity, yet the commodity has come into his risk and control and all the rightsand liabilities are passed on to him, including the risk of its destruction.Husnal Qadha: Gracious payment of loan/debt: repaying a loan in excess of the principal without aprecondition; individuals’ discretion; not to be adopted as a system in which a creditor, lender or aninvestor has expectation of getting some reward on the debt.Ibādāt: Plural of Ibādah, meaning worship or a ritual act.Ibāhatul Asliyah: General permissibility, which means that all economic activities that are not prohibitedby the original sources of Sharī´ah, i.e. the Qurān and Sunnah, are valid/permissible.Ijab: Offer, in a contract (see also Qabul).Ijarah: Letting on lease. Sale of defined usufruct of any asset for a defined period in exchange ofdefinite rent; only those assets can be leased the corpus of which is not consumed with use or theform/shape of which is not entirely changed with use. For example, cotton, yarn, fuel, milk, moneycan be sold/bought, but not leased against rentals. This is because the lessor has to bear the risk relatedto the ownership of the asset, and this is possible only if the leased asset remains intact and the lessorgets reward in the form of rental against taking risk.Ijarah Mosufah bil Zimmah: A lease contract where the lessor undertakes to provide a well-definedservice or benefit without identifying any particular units of asset rendering the related service. If aunit of the asset is destroyed, the contract is not terminated and the lessor provides another such unit.Ijarah Muntahia-bi-Tamleek: Lease culminating in the transfer of ownership to the lessee in such away that lease and sale are kept separate and independent transactions. Use of this term for Islamicleasing is better than Ijarah-wal-Iqtina‘, as the latter tends to give the impression that Ijarah and saleare working side by side, while actually they have to be two separate deals.Ijarah-wal-Iqtina‘: A mode of financing by way of hire–purchase, adopted by Islamic banks butdifferent from conventional hire–purchase. It is a contract under which an Islamic bank purchasesequipment, buildings, etc., giving them on lease against agreed rentals together with a unilateralundertaking that at the end of the lease period, the ownership in the asset will be transferred to thelessee. The underlying contract is Ijarah and all rules applicable to Ijarah have to be observed to makethe deal Sharī´ah-compliant. The undertaking or the promise does not become an integral part of thelease contract to make it conditional. Ownership is transferred through a separate contract of sale orgift. Another term used for this is Ijarah Muntahia-bi-Tamleek.Ijma‘a: Consensus – decision or resolution of generality of the Sharī´ah scholars of any time pertainingto any matters relating to Sharī´ah. Ijma‘a of the Companions of the holy Prophet is considered by theoverwhelming majority of Muslims as part of the Sunnah and an important source for the derivationof laws in the subsequent periods.Ijtihad: An endeavor of a qualified jurist to derive or formulate a rule of law to determine the trueruling of the divine law in a matter on which the revelation is not explicit or certain, on the basis ofNass or evidence found in the Holy Qur’ān and the Sunnah. Express injunctions have no room forIjtihad. Implied injunctions can be interpreted in different ways by way of inference from the acceptedprinciples of the Sharī´ah.‘Illah: The attribute of an exchange or event that entails a particular Divine ruling for cases possessingthat attribute – cause of prohibition of specific exchange contracts. ‘Illah is the basis for applyinganalogy for determining permissibility or otherwise of any transaction.Imam: Leader, guide or ruler.Iman: Faith, belief.