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    Shariah Contracts / Concepts

Bai’ Al-Sarf (Currency Trading)

Bai’ Al-Sarf (Currency Trading)

Contract of exchange between two different currencies.

Ijarah (Lease)

Ijarah (Lease)

A rental agreement between the lessor and lessee whereby the lessee obtains the right to the usufruct on the asset owned by the lessor in consideration of rental payment.

Istisna’ (Manufacture)

Istisna’ (Manufacture)

A contract where a seller sells to a purchaser an asset that is yet to be constructed, built or manufactured, according to agreed specifications and delivered on an agreed specified future date, at an agreed pre-determined price.

Kafalah (Guarantee)

Kafalah (Guarantee)

A contract where the guarantor conjoins the guaranteed party in assuming the latter’s specified liability.

Mudarabah (Profit Sharing)

Mudarabah (Profit Sharing)

A profit-sharing agreement between two parties - an investor and an entrepreneur. The investor will supply the entrepreneur with funds for his business venture and gets a return on the funds he puts into the business based on a profit-sharing ratio that has been agreed earlier.

Murabahah (Mark-Up)

Murabahah (Mark-Up)

A trust sale in which the seller sells the goods to the buyer at cost plus markup payable on spot or deferred terms. Details of the cost and profit shall be disclosed to the buyer.

Musharakah (Profit and Loss Sharing)

Musharakah (Profit and Loss Sharing)

A partnership contract between two or more parties, whereby all parties will share the profit and bear the loss from the partnership.

Wakalah (Agency)

Wakalah (Agency)

A contract where a party, as principal (muwakkil) authorises another party as his agent (wakil) to perform a particular task on matters that may be delegated, with or without imposition of a fee.

Tabarru' (Donation)

Tabarru' (Donation)

This refers to donation and charity. In a Takaful contract, a specified amount of the participant's contribution is treated as Tabarru' and pooled into a Tabarru' fund to pay claim for fellow participants who suffer misfortunes.

Tawarruq (Commodity Murabahah)

Tawarruq (Commodity Murabahah)

A purchase and sale with two stages of transaction, where the first involves the sale of an asset by a seller to a purchaser on a deferred basis. Subsequently, the purchaser of the first sale will sell the same asset to a third party on a cash and spot basis.

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