Islamic Finance Categories

Question 1

Ijara

Answer 1

a leasing agreement whereby the bank buys an item for a customer and then leases it back over a specific
period.

Question 2

Ijara-wa-Iqtina

Answer 2

a leasing agreement whereby the bank buys an item for a customer and the customer is able to buy the item at the end of the contract.

Question 3

Mudaraba

Answer 3

offers specialist investment by a financial expert in which the bank and the customer shares any profits.
Customers risks losing their money if the investment is unsuccessful, although the bank will not charge a handling fee unless it turns a profit.

Question 4

Murabaha

Answer 4

a form of credit which enables customers to make a purchase without having to take out an interest
bearing loan. The bank buys an item and then sells it on to the customer on a deferred basis.

Question 5

Musharaka

Answer 5

an investment partnership in which profit sharing terms are agreed in advance, and losses are pegged
to the amount invested.