FIN 545 BM242 4M

TUTORIAL 2
Due date : Oct 24th 2014

Name

Nurul Fatin Madihah binti Amir Hamzah

Student ID

2013580179

Find the meanings of these terms:

1) Mudarabah - An investment partnership, whereby the investor (the Rab al maal )

provides capital to the entrepreneur (the mudarib) in order to undertake a business or
investment activity. While profits are shared on a pre-agreed ratio, losses are born by
the investor alone. The mudarib loses only his share of the expected income.

2) Musharakah - An investment partnership in which all partners are entitled to a share

in the profits of a project in a mutually agreed ratio. Losses are shared in proportion
to the amount invested. All partners to a Musharakah contribute funds and have the
right to exercise executive powers in that project, similar to a conventional
partnership structure and the holding of voting stock in a limited company.

3) Takaful - Based on the principle of mutual assistance, Takaful provides mutual

protection of assets and property and offers joint risk-sharing in the event of a loss by
one of the participants. Takaful is similar to mutual insurance in that members are the
insurers as well as the insured.

4) Salam - Advance payment for goods which are to be delivered at a specified future
date. Under normal circumstances, a sale cannot be effected unless the goods are in
existence at the time of the bargain. However, this type of sale is an exception,
provided the goods are defined and the date of delivery is fixed. The objects of sale
must be tangible goods that can be defined as to quantity, quality and workmanship.

5) Istisna - A contract of acquisition of goods by specification or order, where the price

is paid in advance, or progressively in accordance with the progress of a job.

6) Buyu - A sale transaction in which a commodity is exchanged for an unequal amount

of the same commodity and delivery is delayed.

7) Duyun - The usury of debt was an established practice amongst Arabs during the
pre-Islamic period. It can occur as an excess increment on top of the principal, which
is incorporated as an obligatory condition of the giving of a loan.

8) Istihsan Involved the preference of an opinion over another opinion because its
appear more suitable to the situation and circumstances.

9) Ijarah - A lease agreement whereby a bank or financier buys an item for a customer
and then leases it to him over a specific period, thus earning profits for the bank by
charging rental.

10) Hiwalah - A contract which allows a debtor to transfer his debt obligation to a third
party who owes the former a debt. The mechanism of Hawala is used for settling
international accounts by book transfers, thus obviating the need for a physical
transfer of cash.

11) Murabahah - A form of credit that enables customers to make a purchase without
having to take out an interest-bearing loan. The bank buys an item and sells it to the
customer on a deferred basis. The price includes a profit margin agreed by both
parties. Repayment, usually in installments, is specified in the contract.

12) Sukuk - An asset-backed bond which is structured in accordance with Shari'a and
may be traded in the market. A Sukuk represents proportionate beneficial ownership
in the underlying asset, which will be leased to the client to yield the return on the
Sukuk.

13) Urf The various customs and social habits of people throughout the Muslim world
were accepted as a secondary sources of the Islamic law as long as they didnt
contradict with the Shariah.

14) Hibah - A gift voluntarily donated in return for a loan provided or a benefit obtained.
15) Muqasah Debt settlement by a contra transaction.