Islamic Finance Law from A-Z

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Ib-ahatul Asliyah

General permissibility, which means that all economic activities that are not prohibited by the original sources of Sharia, i.e. the Quran and Sunnah, are valid/permissible.

Ihtikar

Hoarding; the prohibited practice of purchasing essential commodities, such as food and storing them in anticipation of an increase in price.

Ijara

Ijara is a form of leasing. Sale of defined usufruct of any asset for a defined period in exchange of definite rent; only those assets can be leased the corpus of which is not consumed with use or the form/shape of which is not entirely changed with use. For example, cotton, yarn, fuel, milk, money can be sold/bought, but not leased against rentals. This is because the lessor has to bear the risk related to the ownership of the asset, and this is possible only if the leased asset remains intact and the lessor gets reward in the form of rental against taking risk.

Ijarah wa-iqtina/ Ijarah Muntahia-bi-Tamleek

Lease-and-purchase transaction; a financing instrument used by practitioners of contemporary Islamic finance in which a financier purchases reusable merchandise (e.g. airplane, buildings, cars) and then leases them to clients in return for an agreed upon rental fee (to be paid for the length of the lease period) and an agreement that the client will purchase the merchandise at the end of the lease period.. There are similar transactions of various names, among them al-ijarah al-muntaha bi-tamlik.

Ijma

Consensus – decision or resolution of generality of the Sharia scholars of any time pertaining to any matters relating to Sharia. Ijma of the Companions of the holy Prophet is considered by the overwhelming majority of Muslims as part of the Sunnah and an important source for the derivation of laws in the subsequent periods.

Ijtihad

An endeavor of a qualified jurist to derive or formulate a rule of law to determine the true ruling of the divine law in a matter on which the revelation is not explicit or certain, on the basis of evidence found in the Quran and the Sunnah. Express injunctions have no room for Ijtihad. Implied injunctions can be interpreted in different ways by way of inference from the accepted principles of the Sharia.

Ikhtikar

Monopoly

Ikhtilaf

Divergence of opinions among jurists

Iktinaz

Hoarding wealth by not paying zakah on it.

Imam

Leader, guide or ruler.

Iman

Conviction, faith or belief; the acceptance and affirmation of Allah, His Books, His Messengers, His Angels, the Hereafter and Divine Decree.

Inah

A sale in which a purchaser buys merchandise from a seller for a stipulated price on a deferred payment basis and then sells the same merchandise back to the original seller for a price lower than the original purchase price.

Infaq

Spending, normally in the path of Allah. Among the various praiseworthy types of infaq are spending on one's family, spending in preparation for jihad and feeding and clothing orphans and other underprivileged individuals.

Iqtisad

Lit. moderation. The term is used in modern standard Arabic to denote the field of economics.

Islam

(Lit. submission to Allah) The religion of Allah (God) i. e. the worship of Allah alone. Islam is (1) shahadah i. e. testifying that there is no god but Allah and that Muhammad is the Messenger of Allah, (2) establishing Salah i. e. prescribed prayer, (3) paying Zakah i. e. giving a portion of one's wealth to the needy, (4) the Sawm of Ramadan i. e. fasting during the 9th month of the Islamic calendar and (5) Hajj i. e. making pilgrimage to the sacred precincts of Makkah (Mecca) in Arabia once in a lifetime if one is able. A person whose religion is Islam is a Muslim. A person becomes Muslim by declaring the shahadah i.e. " Ashhadu an la ilaha illallah wa ashhadu anna Muhammadan rasulullah" ("I tesify that there is nothing rightfully worshipped except Allah and I testify that Muhammad is the Messenger of Allah").

Israf

Immoderateness, exaggeration in spending wealth and waste, covers spending on objects which are permissible otherwise, spending on superfluous objects, spending on objects which are not needed and are incompatible with the economic standard of the majority of the population.