Gharar meaning

Shari’ah compliant, or Islamic, finance is a method of funding grounded in the principles and prohibitions of Shari’ah (Islamic law). These rules stem from a range of sources, with further detail provided in Practice Note: Sources of Shari'ah. That Practice Note sets out the fundamental principles and prohibitions that underpin the structuring of Islamic finance transactions, and explains how arrangements are shaped to reflect them. In practice, the question of whether a given Islamic finance transaction satisfies these standards—and so can be treated as Shari’ah compliant—rests with the Shari’ah board of the institution offering or arranging the finance and, less commonly, with the Shari’ah board of a corporate making use of the facility. As a general rule, the default assumption is that a transaction presented as Shari’ah compliant or Islamic will be acceptable unless it breaches core principles or passes important thresholds. For additional information, see Practice Note: Key participants in the Islamic finance industry. Money—no intrinsic value Under Shari’ah, money is regarded purely as a yardstick of...

Banking & Finance glossary A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The foremost Islamic, international, autonomous, independent, not-for-profit corporate body that develops and issues accounting, auditing, governance, ethics and Shari’ah benchmarks and standards for Islamic Financial Institutions (IFIs) and the wider Islamic finance sector. Founded in Bahrain in 1991, it is backed by a number of institutional members across more than 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing practices, and legal firms. Its pronouncements are currently applied by leading Islamic financial institutions across the world and have advanced a progressive and gradual harmonisation of global Islamic finance practice. It also delivers professional qualification programmes—notably Certified Islamic Professional Accountant (CIPA), Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance programme—in efforts to strengthen the industry’s human capital and governance frameworks. For further details, see Practice Note: Key participants in the Islamic finance industry—Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration is the formal action...

The Islamic finance sector has expanded swiftly in recent years, as financial institutions and their customers look to explore alternative ways of financing and raising funds. It is an asset‑based system, and Islamic finance has seen rising deployment for both full and partial funding of aircraft—assets regarded as permissible investments under Islamic law (Shariah). Principles of Islamic finance The principles of Islamic finance are drawn from Shariah as prescribed in the Quran, the sacred scripture of Islam believed to record the Word of God revealed to the Prophet Mohammed, together with the Sunnah, the traditions and practices of the Prophet Mohammed. These sources set out the principles applied to finance. Islamic finance is established to ensure that wealth remains pure and is utilised justly, in accordance with these overarching principles, safeguarding fairness in application and conduct: No unjust enrichment—Riba The charging of interest, or Riba, is strictly prohibited In Islamic finance, money should not be treated as a...