The IFG Dictionary

A dictionary of the most commonly used terms in Islamic finance, all under one roof!

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The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is a non-profit organization based in Bahrain. It is responsible for establishing and promoting Shariah standards for Islamic financial institutions and the industry as a whole.

Al-Ghunm Bil Ghurm

Al-Ghunm Bil Ghurm means bearing the liability of loss in a transaction. This principle implies that a person who stands to gain from a transaction should also be willing to bear any potential losses.

Al-Kharaj Bil Daman

Al-Kharaj Bil Daman refers to entitlement to profit or gain being tied to corresponding liability for loss. This concept suggests that if a person doesn't bear the risk of loss in a transaction, they shouldn't enjoy the profits arising from it.


Aqd is an Arabic term for a contract or agreement.


Bai Al-Inah

Bai Al-Inah is a controversial financial transaction used in Islamic finance that involves a series of buyback agreements, effectively disguising a loan with interest.

Bai Istisna

Bai Istisna is an Islamic contract that involves the sale of a commodity that has not yet been manufactured. The buyer pays in advance, and the seller agrees to produce and deliver the specified commodity.

Bai Salam

Bai Salam is an Islamic contract where a buyer pays in advance for goods (often agricultural products) that will be delivered at a later date. This provides financing to the seller.

Bai Urbun

Bai Urbun is an Islamic contract where a nominal advance payment is made on the condition that it will be adjusted upon purchase or


Commodity Murabaha

Commodity Murabaha is a cost-plus-profit arrangement where specific commodities are purchased and then sold to a third party. This is a common Islamic financing structure.

Cost-Plus Financing

This is an Islamic financing arrangement where the cost of a good or service, plus an agreed-upon profit margin, is paid over time.



Dayn is an Arabic term for debt. It refers to an obligation to repay a sum of money to another party.


A derivative is a financial instrument whose value is derived from an underlying asset, index, or interest rate. It allows investors to speculate on or hedge against changes in the value of the underlying asset.

Diminishing Musharakah

Diminishing Musharakah is a form of partnership where one partner gradually buys out the other partner's share until full ownership is achieved.



Gharar refers to excessive uncertainty, ambiguity, or risk in a contract or transaction. It is discouraged in Islamic finance to ensure fair and transparent dealings.



Hawalah is an informal system of transferring money or debts from one person to another based on trust. It involves a network of intermediaries, often money brokers, who facilitate the transfer.


Hiba is an Arabic term for a voluntary gift or donation. It involves the transfer of ownership of property from one person to another without any expectation of receiving something in return.

Hilah / Hiyal

Hilah or Hiyal refers to legal stratagems or devices used to achieve a desired outcome within the bounds of Islamic law.



The Islamic Financial Services Board (IFSB) is an international standard-setting organization that aims to promote and enhance the stability and soundness of the Islamic financial services industry. It issues global prudential standards and guiding principles for the industry.


Ijarah is an Arabic term for a leasing contract. In Islamic finance, it involves renting out an asset or property for a fixed period and price.

Ijarah Mawsuufah fi Dhimmah

Ijarah Mawsuufah fi Dhimmah is a form of forward lease, where rent is paid in advance before the asset is delivered. If the asset isn't delivered, the rent is refunded.

Ijarah Wa Al-Iqtina

Ijarah Wa Al-Iqtina refers to a lease arrangement where the lessee has the option to eventually purchase the leased asset.

Isqat Haq

Isqat Haq refers to the relinquishing of rights in a contract.



Ju'alah is a contract specifying rewards or wages given in return for successfully completing a specific task or job.



Kafalah is a contract in which one party guarantees the obligations of a third party in case of default.



Maysir refers to gambling or speculation, which is considered haram (forbidden) in Islamic finance.


Mudarabah is a type of partnership in Islamic finance where one party provides the capital (silent partner) and another provides the labor and expertise (working partner). Profits are shared according to an agreed-upon ratio, but losses are borne primarily by the silent partner.


Musawammah is a type of general sale in Islamic finance where the price of the commodity is determined through negotiation between the buyer and seller. Unlike some other types of sales, the cost incurred by the seller isn't typically referenced in the price.


Musharakah is a form of partnership in Islamic finance where two or more parties contribute capital to a business venture. Profits and losses are shared based on an agreed-upon ratio, and active participation in management may be involved.


Qard Hasan

Qard Hasan is an interest-free loan given out of goodwill and benevolence, where the lender does not charge any interest or expect any form of benefit in return.


Qimar refers to gambling, which is an arrangement where ownership of a property is contingent upon the occurrence of an uncertain event. Gambling is considered haram (forbidden) in Islamic finance.



Riba refers to interest or usury, and in Islamic finance, it denotes any form of excess compensation or unfair advantage obtained from a loan or exchange of goods.

Riba Al-Fadl

Riba Al-Fadl refers to the excess in a transaction of the same kind of commodity, where quantity and quality differ.

Riba Al-Nasiah

Riba Al-Nasiah refers to the addition of a premium on a loan in return for delaying its repayment.


A Roboadvisor is an automated digital platform that provides investment advice and manages portfolios for clients based on algorithms and predefined criteria, often with minimal human intervention.


Sadd Al-Dharai

Sadd Al-Dharai is a principle in Islamic jurisprudence that aims to block the means to evil or wrongdoing.


Sharia is the body of Islamic law derived from the Quran and the Hadith (teachings of Prophet Muhammad). It provides guidance on all aspects of life, including financial transactions.


Sukuk are Islamic financial instruments similar to bonds. They represent ownership in an underlying asset or project.



Tabarru is a donation made for the purpose of mutual assistance and solidarity among participants in a Takaful (Islamic insurance) scheme.


Tahawut is an Arabic term for hedging, which involves using financial instruments to offset or reduce the risks associated with investments or financial transactions.


Takaful is an Islamic cooperative insurance system based on mutual assistance and shared risk.


Tanazul is an act of waiving certain rights of claim in favor of another party in a contract.


Tawarruq involves buying a commodity on credit, then selling it at a lower price for cash. It is a financial arrangement used in Islamic finance to generate liquidity. It is a legal structure that is not usually the preferred route for Islamic scholars.



Urf refers to customary practices that are considered in Islamic law when determining legal rulings.

Usul al-Fiqh

Usul al-Fiqh is the methodology used to derive rulings in Islamic jurisprudence.


Wad Contract

A Wad Contract is a promise or undertaking, commonly used in specific Islamic finance transactions.


Wadiah is an arrangement in Islamic banking that involves safekeeping or depositing funds with a financial institution for a specified period. The bank is considered the custodian of the funds, and the depositor may or may not receive a return.


Wakalah is an Islamic contract where one person authorizes another to perform a specific legal action on their behalf. It involves granting agency power to act in a defined capacity.


Waqf is an Arabic term for an endowment, where a specific asset or property is donated for a charitable purpose. The donated asset's income or benefits are typically used for the specified cause.