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| • Wadiah
Yad Dhamanah (savings with guarantee) |
| Refers to placement of goods or deposits with another person, who is
not the owner, for safe-keeping. Wadiah Yad Dhamanah is a
guaranteed trust, the depository becomes the guarantor and therefore,
guarantees repayment of the whole amount or any part thereof,
outstanding in the account of depositor, when demanded. The depositors
are not entitled to any share of the profits but the depository may
provide returns to the depositors as a token of appreciation. |
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| •
Mudharabah (profit-sharing) |
| Refers to an arrangement made between two parties i.e. the fund
provider and the entrepreneur (who provides expertise) to enable the
entrepreneur to carry out business projects. The profit-sharing ratio
needs to be pre-determined during the agreement. In the case of losses,
the losses are to be borne by the provider of the funds*. |
| * Unless the loss arises out of willful negligence,
misappropriation by the entrepreneur, etc. |
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| •
Musyarakah (joint venture) |
| Refers to a partnership or joint venture for a specific business
with a profit motive, whereby the distribution of profits will be
apportioned according to the agreed ratio. In the event of losses, both
parties will share the losses on the basis of their equity
participation. |
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| • Murabahah
(cost-plus) |
| Refers to the sale of goods at a price which includes a profit
margin in addition to the cost. Such a contract is valid on condition
that the price, other costs and the profit margin of the seller are
stated at the time of the agreement on the sale. |
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| • Bai
Bithaman Ajil (deferred payment sale) |
| Refers to the sale of goods on a deferred payment basis at a price
which includes a profit margin agreed to by both parties. |
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| • Bai Al-Dayn
(debt-trading) |
| Refers to debt financing, i.e. the provision of financial resources
required for production, commerce and services by way of sale/purchase
of trade documents and papers. It is a short-term facility with a
maturity of not more than a year. Only documents evidencing real debts
arising from bona fide commercial transactions can be traded. |
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| • Ijarah
(leasing) |
| Refers to an arrangement under which the lessor leases an equipment,
building or other facility to a client at an agreed rental against a
fixed charge, as agreed by both parties. |
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| • Ijarah
Thumma Al-Bai (leasing and subsequent purchase) |
Refers to two contracts undertaken separately and consequentially as
follows:
(i) Ijarah contract (leasing/renting); and
(ii) Bai' contract (purchase).
Under the first contract, the hirer leases the goods from the owner at
an agreed rental over a specified period. Upon expiry of the leasing
period, the hirer enters into a second contract to purchase the goods
from the owner at an agreed price. This concept is applicable for
financing of consumer goods and durable. |
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| • Qardhul
Hasan (benevolent loan) |
| Refers to an interest-free loan. The borrower is only required to
repay the principal amount borrowed, but he may pay an additional amount
at his absolute discretion, as a token of appreciation. |
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| • Bai Al-Salam
(future delivery) |
| Refers to an agreement whereby payment is made immediately while the
goods are delivered at a later date. It is equivalent to an advance
payment. |
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| • Bai Al-Istijrar
(supply contract) |
| Refers to an agreement between the client and the supplier, whereby
the supplier agrees to supply a particular product on an on-going basis,
for example monthly, at an agreed price and on the basis of an agreed
mode of payment. |
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| • Kafalah
(guarantee) |
| Refers to the guarantee provided by a person to the owner of a good,
who had placed or deposited his good with a third party, whereby any
subsequent claim by the owner for his good must be met by the guarantor
and the third party. |
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| • Rahn (collateralised
borrowing) |
| Refers to an arrangement whereby a valuable asset is placed as a
collateral for a debt. The collateral may be disposed in the event of
default. |
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| • Wakalah
(nominating another person to act) |
| Refers to a situation, where a person nominates another person to
act on his behalf. |
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| • Hiwalah
(remittance) |
| Refers to a transfer of funds / debt from the depositor's / debtor's
account to the receiver's / creditor's account where a commission may be
charged for such service. |
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| • Sarf
(foreign exchange) |
| Refers to the buying and selling of foreign currencies. |
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| • Ujr
(fee) |
| Refers to commissions or fees charged for services. |
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| • Istisna |
| Refers to a contract of sales and purchase of assets by
specification or order where the price is paid in advance but the assets
are manufactured or produced and delivered at a later date. |
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