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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*.
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| * 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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