Islamic Banking

Islamic Banking

Mervyn K. Lewis and Latifa M. Algaoud

The prohibition of interest is the feature of Islamic banking which most distinctly sets it apart from conventional banking. To Western eyes, this seems a strange restriction, but Christian countries themselves maintained such a ban for 1,400 years. Islamic Banking asks why Islam has been able to maintain its stand. The book explores the intricacies of Islamic law and the religious and ethical principles underpinning Islamic banking. It then considers the analytical basis of Islamic banking and financing in the light of modern theories of financial intermediation, and identifies the conceptual issues to be overcome.  

Glossary

Mervyn K. Lewis and Latifa M. Algaoud

Subjects: economics and finance, financial economics and regulation, islamic economics and finance, money and banking

Extract

This section explains some Arabic words and terms occurring in the study. Allah is Arabic for God. Al-wadiah is safe keeping (see Wadia). Amana is trust; the contract of amana gives rise to fiduciary relationships and duties. Bai bi-thamin ajil is deferred payment sale by instalments. Bai’muajjal is deferred-payment sale. Bai’salam is pre-paid purchase. Bay (bai) is a comprehensive term that applies to sale transactions, exchange. Bayt al-mal means house of wealth. It is a medieval financial institution aimed at managing the monetary activities of the ‘Islamic state’ and can be regarded as a public treasury. Bida refers to innovation, deviation from Islamic tradition. Fatawa (sing. fatwa) are legal decisions or opinions rendered by a qualified religious leader (mufti). Fiqh is Islamic jurisprudence, the science of religious law, which is the interpretation of the Sacred Law, shari’a. Fuqaha (sing. faqih) are Muslim jurisprudents who have religious authority. Gharar is uncertainty, speculation. Hadîth (plural ahadith) is the technical term for the source related to the Sunna; the sayings - and doings - of the Prophet (pbuh), his traditions. Hajj is pilgrimage to Mecca. Halal means permitted according to the shari’a. Haram means forbidden according to the shari’a. Hiyal (plural of hila) are ‘permissions’ or legal manipulations, evasions. Ijara contract is a leasing contract. Ijara wa iqtina is a lease-purchase contract, whereby the client has the option of purchasing the item. Ijma means consensus among jurists based on the Holy Qur’an and sunna, and one of the four sources of law...