The Malaysian banking regulator has embarked on a massive overhaul of its country's Islamic banking business, the better to promote services to the rest of the Islamic world of high-net-worth clients. In the process it has come up with an invaluable glossary of terms in regulatory English.

Bank Negara Malaysia, the banking regulator, is
issuing a series of policy documents or 'exposure drafts' on Shariah
contracts to facilitate end-to-end compliance with Shariah law in its jurisdiction. In
doing so, it has inadvertently given the Anglo-Saxon world a
first-class glossary of Islamic banking terms as interpreted by a
conventional banking regulator.

In the banking regulator's terminology,
“Islamic financial institutions” or “IFIs” are the following.

(a) Licensed Islamic banks and licensedtakaful operators (see glossary below) under the Islamic
Financial Services Act 2013.

(b) Licensed banks and licensed
investment banks under the Financial Services Act 2013 which
are approved under s15(1)(a) to do Islamic banking business.

(c) Prescribed institutions under theDevelopment Financial Institutions Act which are approved
under s129(1) to do Islamic banking business or Islamic
financial business.

Compliance officers at private banks
and asset-management firms that deal with Islamic banks – whose due
diligence tends to leave much to be desired – are likely to need
such a glossary, the terms and definitions of which we list here. All
items are from the Bank's recent exposure drafts, for which it has
invited written comments from the regulated community. The deadline
for replies is 10 January 2014.

Amanah Trusteeship.

Aqd al-amanah Contract based on
a fiduciary relationship.

Amin Trustee

Ahl li al-tabarru` Legal
capacity to perform a benevolent act.

Bai` `inah An arrangement that
involves sale of an asset to the purchaser on a deferred basis and
subsequent purchase of the asset at a cash price lower than the

deferred sale price or vice versa, and
which complies with the specific requirements of bai` `inah.

Dhamanah Guarantee.

Dayn lazim A legally binding
debt.

Fara’id The rules of estate
distribution according to the Shariah.

Gharamah Penalty.

Hamish jiddiyyah A security
deposit placed to secure the undertaking to purchase an asset before
execution of the sale and purchase agreement contract. OR...

A deposit placed to secure purchase
of an asset before execution of the murabahah contract.

Hiwalah Assignment of debt from
the liability of the original debtor to the liability of a third
person so that the original debtor becomes free of liability.

Hibah Contract of transfer of
ownership of an asset during the lifetime of the donor without any
consideration or reward in return.

Hibah ruqba A conditional hibah
which contingent upon the demise of either of the parties.

Hiwalah Contract of assignment
of debt from the liability of the original debtor to the liability of
a third person so that the original debtor becomes free of liability.

Ibra’ Rebate.

Ijarah Lease or service
contract that involves benefit/usufruct of a certain asset or work
for an agreed payment or commission within an agreed period OR...

A contract that transfers ownership
of a permitted usufruct or service for a specified period in exchange
for a specified consideration.

I`arah Transfer of usufruct of
a non-perishable asset to someone with the requirement to return the
asset without any counter-value

Ijma` Consensus of Muslim
jurists

Istisna` An agreement to sell
to a purchaser a non-existent asset that is to be constructed, built
or manufactured according to the agreed specifications and delivered
on a specified future date at a predetermined price of the istisna`
asset.

Kafil Guarantor.

Kafalah A contract of
conjoining guarantor’s liability to the guaranteed party’s
liability in a way that the obligation of the guaranteed party is
established as a joint liability of the guarantor and guaranteed
person. OR...

A guarantee.

Kafalah al-`ayn Guarantee of a
physical asset.

Kafalah al-dayn Guarantee of a
debt liability.

Kafalah bi al-mal Commercial or
financial guarantee.

Khiyar al-`ayb Option arising
from a defect; the option of dissolving or continuing the contract
upon discovery of a defect in the asset purchased.

Majlis al-`aqd Place of the
contract session.

Maradh al-maut Terminal illness.

Mawhub lahu Donee.

Marhun Collateral

Mudarabah Profit-sharing
contract. OR...

A contract between a capital
provider (rabbul mal) and an entrepreneur (mudarib) under which the
rabbul mal provides capital to be managed by the mudarib and any
profit generated from the capital is shared between the rabbul mal
and mudarib according to mutually agreed profit-sharing ratio (PSR)
whilst financial losses are borne by the rabbul mal provided that
such losses are not due to the mudarib’s misconduct (ta`addi),
negligence (taqsir) or breach of specified terms (mukhalafah
al-shurut).

Mudarib The entrepreneur in a
mudarabah venture.

Mukhalafah al-shurut Breach of
terms and conditions.

Mukhalafah al-quyud Breach of
restrictions

Muqassah Offsetting.

Murabahah Contract a sale and
purchase of an asset where the acquisition cost and the mark-up are
disclosed to the purchaser. OR...

A sale and purchase of an asset
where the acquisition cost and the mark-up are disclosed to the
purchaser.

Musawamah Sale contract without
the disclosure of the asset cost price and profit margin to the
buyer.

Musharakah Profit-and-loss-sharing
contract.

Musharakah Mutanaqisah An
arrangement entered into by two or more parties on a particular asset
or venture which allows one of the partners to gradually acquire the
shareholding of the other partner through an agreed redemption method
during the tenure of the contract.

Mudi` Safekeeping depositor.

Muqassah Offsetting.

Mahal al-sharikah Musharakah
venture

Muwakkil Principal

Makful `anhu The guaranteed
party is a debtor or a party

guaranteed by the guarantor.

Makful lahu The beneficiary is
a creditor or a party who has the right to claim the liability (debt)
from the guaranteed party (makful `anhu) or the guarantor (kafil).

Ma ya’ul ila luzum A debt that
will become legally binding in the future.

Qabd haqiqi Taking physical
possession. It refers to a state where a person has taken actual
possession and the rights to control an asset.

Qabd hukmi Taking constructive
possession. It refers to a state where a person has not taken actual
possession but has the legal right to control an asset.

Qard A contract of lending a
fungible asset to a party who will benefit from it and who will
subsequently return an equivalent replacement. OR...loan contract.

Rahn Pledge/Charge.

Riba Any excess compensation
without any corresponding counter-value recognised by Shariah.

Ribawi asset Assets which are
subject to specific rules in sales to avoid the implication of riba.
These assets consist of six (6) types and are classified into two (2)
categories:

(a) Medium of exchange (currency)
represented by gold and silver and any items used as currency; and

(b) Staple food represented by wheat,
barley, dates, and salts.

If an exchange involves the same type
of asset such as gold for gold or wheat for wheat, then it must be of
equal counter-value and on spot basis. If the exchange involves
assets of different type but within the same category such as the
exchange of gold for paper currency, then it has to be done on spot
basis.

Rabbul mal Capital provider.

Salam A contract in which
advance payment is made for an asset to be delivered at a future
date.

Takaful An arrangement based on
mutual assistance under which takaful participants agree to
contribute to a common fund providing for mutual financial benefits
payable to the takaful participants or their beneficiaries upon the
occurrence of pre-agreed events

Ta`addi Misconduct.

Takhliyah Relinquishing or
abandoning the rights of ownership.

Taqsir Negligence.

Tamkin Enabling the person who
has the ownership of an asset transferred to him to make full use and
assume liability of the asset.

Tawarruq An arrangement that
involves sale of in which an asset to the purchaser is purchased with
on a deferred basis, and subsequently subsequent sale of the asset
sold to a third party on spot a cash basis to obtain cash or vice
versa. OR...

Purchasing an asset with a deferred
price, either on the basis of musawamah or murabahah, and
subsequently selling it to a third party to obtain cash.

Tawliyah Sale of a good at its cost
price.

Ta`widh Compensation.

Tasarruf fuduli Unauthorized
transaction

`Urf Customary practice.

`Urf tijari Common business
practice which is accepted by the community and does not contradict
Shariah rulings.

`Urbun Earnest money paid to
secure purchase of an asset in an exchange contract which is
considered part of the price if the buyer decides to continue the
contract and is not refundable.

`Urf tijari Common business
practice which is acceptable by the community and does not contradict
the Shariah rulings.

Wa`d An expression of
commitment given by one party to another to perform certain action(s)
in the future. OR...promise or commitment or pledge or covenant.

Wakalah A contract in which a
party (muwakkil) authorises another party as his agent (wakil) to
perform a particular task in matters that may be delegated, either
voluntarily or with imposition of fee.

Wadi` Custodian.

Wadi`ah yad amanah Safekeeping
based on trusteeship.

Wadi`ah yad dhamanah Safekeeping
based on guarantee.

Wasi Nominee.

Wakalah Agency contract

Wakalah bi al-istithmar Agency
contract for investment

Wakalah bi ujrah Fee based
agency

Wakalah muqayyadah Restricted
agency

Wakalah mutlaqah Unrestricted
agency

Wakil Agent