Understanding Islamic Finance - Doha Academy of Tertiary Studies

Glossary 495Takaful: A form of Islamic insurance based on the principle of Ta’awon or mutual assistance. Itprovides for mutual assistance in cases of loss to life, assets and property and offers joint risk-sharingin the event of a loss incurred by one of the pool members.Taqwa: Piety, virtue and righteousness with a sense of accountability to Allah (SWT). It encompassesnot only obedience to Allah, but also the love of fellow human beings, who should be treated as partof an extended human family.Tawarruq: Acquiring cash through trade activities – to buy on credit and sell at spot value with theobjective of getting cash, meaning that the trade transaction was not needed by the buyer; he simplywanted liquidity, which he got by purchasing a commodity on credit and selling the same to a thirdparty on cash.Thaman: Price, monetary value of a commodity in an exchange.Thaman-e-mithl: Normal/market price that has to be paid in case any issue arises in deciding theactual price in any transaction.Ujrah: Wages/service fees against work done for others; Ijarah of services; different from Ju‘alahwhich means giving a reward for accomplishment of a defined task. While in Ujrah, acceptance of“offer” by a specified person is necessary, in Ju‘alah, anyone who hears the offer can undertake thework and becomes entitled to reward only upon completion of the job.Ujratul-mithl: A remuneration or compensation which has to be given as per normal market rate ifthe underlying contract(s) become voidable.Uqood-e-Mu‘awadha: Commutative contracts in which one can genuinely take any return, likecontracts of Bai‘, Ijarah and Wakalah.Uqood Ghair Mu‘awadha: Noncommutative contracts wherein one cannot get any return or compensation,like contracts of loan (Qard), gift (Tabarru‘/Hibah), Guarantee (Kafalah) and assignment ofdebt (Hawalah).W‘adah: Promise – does not create contractual rights and obligations; may be binding or unbinding.Wadi‘ah: Amānah or deposit; the trustee is not responsible for loss except in the case of negligenceon his part. If, however, the Amānah amount is used in business, with the permission of the owner,the amount becomes the trustee’s liability.Wakalah: Contract of agency, can be commutative or noncommutative.Wakalatul Istismār: Investment agency – fund management in which the investor gets all the profitor loss while the fund manager gets a pre-agreed service fee or commission that could be a lump sumamount or a certain percentage of the invested capital.Waqf: Retention of a property for the benefit of a charitable or humanitarian objective, or for aspecified group of people such as members of the donor’s family. There are three kinds of Waqf inIslamic jurisprudence: religious Waqf, philanthropic Waqf and family Waqf. The Waqf property canneither be sold nor inherited or donated to anyone.Yadam-bi-yadin: Hand to hand or on the spot (in exchange transactions).Zakah/Zakat: Zakah is the third out of five pillars of Islam. A religious tax on Muslims having wealthover and above an exemption limit (Nisab) at a rate fixed by the Sharī´ah. As such, it is not a tax onincome, but on the assets held by a Muslim at a prescribed date (a Zakat day has to be determined forcalculation of Zakat money to be paid annually) over and above the amount of Nisab after fulfilmentof the normal needs of the owner. The objective is to take away a part of the wealth of the well-to-doand to distribute it among the poor and the needy. It is levied on cash, cattle, agricultural produce,