Fiqh
Islamic
jurisprudence. The science of the Shariah. It is an important source of Islamic
economics.
Gharar
Uncertainty,
hazard, chance or risk. Technically, sale of a thing which is not present at
hand; or the sale of a thing whose consequence or outcome is not known; or a
sale involving risk or hazard in which one does not know whether it will come
to be or not, such as fish in water or a bird in the air. Deception through
ignorance by one or more parties to a contract. There are several types of
gharar, all of which are haram. The following are some examples:
•
Selling goods that the seller is unable to deliver
•Selling
known or unknown goods against an unknown price
•
Selling goods without proper description
•
Selling goods without specifying the price
•
Making a contract conditional on an unknown event
•
Selling goods on the basis of false description
•
Selling goods without allowing the buyer to properly examine the goods
The
root Gharar denotes deception. Bay' al-Gharar is an exchange in which there is
an element of deception either through ignorance of the goods, the price, or
through faulty description of the goods. Bay' al-Gharar is an exchange in which
one or both parties stand to be deceived through ignorance of an essential
element of exchange. Gambling is a form of Gharar because the gambler is
ignorant of the result of his gamble.
Halal
That
which is permissible. In Islam there are activities, professions, contracts and
transactions which are explicitly prohibited (haram) by the Qur'an or the
Sunnah. Barring them, all other activities, professions, contracts, and
transactions etc. are halal. An activity may be economically sound but may not
be allowed in the Islamic society if it is not permitted by the Shari'ah.
Hawala
Bill
of exchange, promissory note, cheque or draft. Technically, a debtor passes on
the responsibility of payment of his debt to a third party who owes the former
as debt. Thus the responsibility of payment is ultimately shifted to a third
party. Hawala is a mechanism for settling international accounts, by book
transfers.
Ijara
(Leasing)
A
contract where the bank or financier buys and leases equipment or other assets to
the business owner for a fee. The duration of the lease as well as the fee are
set in advance. The bank remains the owner of the assets. This type of contract
is a classical Islamic financial product. Leasing is also a lawful method of
earning income, according to Islamic law. In this method, tangible assets such
as machinery, a car, a ship, a house, can be leased by one person (lessor) to
the other (lessee) for a specific period against a specific price. The benefit
and cost of the each party are to be clearly spelled out in the contract so
that any ambiguity (Gharar) may be avoided.
Ijarah
wa Iqtina (Lease to Purchase)
This
term refers to a mode of financing adopted by Islamic banks. It is a contract
under which the Islamic bank finances equipment, a building or other facility
for the client against an agreed rental together with an undertaking from the
client to purchase the equipment or the facility. The rental as well as the
purchase price is fixed in such a manner that the bank gets back its principal
sum along with some profit which is usually determined in advance.
Ijtehad
Effort,
exertion, industry, diligence. Technically, endeavor of a jurist to derive or
formulate a rule of law on the basis of evidence found in the sources.
Istisna
(Progressive Financing)
A
contract of acquisition of goods by specification or order where the price is
paid progressively in accordance with the progress of a job. An example would
be for the purchase of a house to be constructed, payments are made to the
developer or builder according to the stage of work completed. This type of
financing along with bai salam are used as purchasing mechanisms, and murabaha
and bai muajjal are for financing sales.
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