Islamic Economics and Finance

A Glossary

Muhammad Akram Khan, Tony Watson

• Publisher: Taylor & Francis
• Year: 2003
• Print ISBN: 9780415318884
• eBook ISBN: 9781134365999
• Edition: 2
• Topic: Business
• Subtopic: Business General
• Index: Business

Islamic economics and finance have increased in importance over the last few decades, with new Islamic financial institutions opening up and a number of important books published on the topic.This glossary, fully updated and revised for the new edition, uses easy to understand language to introduce terms used by Muslim scholars, historians and lega

Glossary

A

AAD (Arab accounting dinār) One AAD is equal to 3 SDRs (Special Drawing Rights). Used for settling balances among Arab League countries. See also AMF.

AAIB (African Arabian Islamic Bank) An international bank registered in the Bahamas and entirely owned by private Muslim individuals, the bank claims to conduct its operations on the basis of the sharī‘ah. It offers services in syndicated interest-free loans, international investment, technology transfer, trade, commodities and currency trade and development funding. Perhaps the most prestigious of the bank’s involvements was the multi-million dollar monorail scheme linking Calgary to Edmonton (Canada) in 1984. Similarly, the bank was arranging financial and trading services for Powell Chemicals of the United States for Arabian Express Card – the first consumer discount and travel protection card in the Arab World – and for various other activities, such as gold and diamond mining in West Africa, windmill technology in Salt Lake city and tar-sand technology in Canada.

AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) A private sector standard setting body, based in Bahrain, with the aim of producing international accounting standards within the sharī‘ah framework for Islamic banks and financial institutions. Within the organization, there is a Financial Accounting Standards Board consisting of 22 voluntary members representing Islamic banks, users of financial statements of these banks, practicing accountants, academics, sharī‘ah scholars and regulatory bodies. The Board is assisted by a sharī‘ah committee, which reviews proposed pronouncements and advises the Board on their compliance with the Islamic precepts. There is an Executive Committee for Planning and Follow-up, which recommends priorities to the Board and draws up its agenda. The Supervisory Committee of the organization consists of 17 voluntary members and has the responsibility, besides oversight, to raise funds for the organization. The AAOIFI follows an extensive due process of eight phases which governs the production of its standards.

ABC (Arab Banking Corporation) Islamic Bank An exempt joint stock company incorporated in Bahrain in 1985 and a wholly owned subsidiary of the ABC. It operated as an investment bank up to 31 December 1997 but has engaged exclusively in Islamic banking activities since then. Authorized capital at the end of 1998 was US$ 52.5 million, of which US$ 42.5 million was issued and fully paid.

ABID (al-Baraka Investment and Development Company) ABID, established in 1982, is the financial services arm of the Dallah Al-Baraka Group of Saudi Arabia, encompassing 43 banks, financial and investment institutions in 29 countries and is responsible for managing the group’s world-wide Islamic banking, insurance and leasing resources. Founded in 1969 by Sheikh Saleh Abdullah Kamel, the group is a conglomerate of over 300 companies and had an asset base of US$ 7.0 billion and investment of US$ 900 million in 1997.

ACC (Arab Cooperation Council) Set up by Egypt, Iraq, Jordan and Yemen. Aims are: coordination and harmonization of major economic policies, especially in finance, customs, industry, trade and agriculture moving towards a common market.

ACM (Arab Common Market) Egypt, Iraq, Jordan and Syria formed the ACM in 1964 and abolished all tariffs on locally produced agricultural, animal and mineral products in 1971 and on manufactured goods in 1973. Libya joined the ACM in 1977, Mauritania in 1980 and PDR Yemen in 1982. These countries did not implement the free trade provisions until the end of 1985. In practice, non-tariff barriers were not removed.

ACU (Asian Clearing Union) Established in 1974 and started functioning in 1975, has seven members of which Bangladesh, Iran and Pakistan are Organization of Islamic Conference (OIC) members. Other members are Myanmar (formerly Burma), India, Nepal and Sri Lanka. The objective is to facilitate payments for current international transactions and to promote use of participants’ currencies. The unit of account is Asian Monetary Unit, which is equivalent to 1 SDR of the International Monetary Fund (IMF).

acquired equity A proposed term for the capital that a business firm other than a joint stock company obtains for meeting its financing needs for a specified period after which it would be returned to the investors. The basis for acquiring these funds could be any of the permissible modes of finance. This is to be distinguished from the owners’ equity, which is contributed by the owners on a permanent basis. An alternative term for such financing is redeemable equity.

al-‘adadīyāt Things that are sold by units, such as oranges and eggs.

’aḍāḥī Lit: Sacrifice of animals. Tech: Obligation on every person having wealth beyond a certain minimum (niṣāb) to sacrifice an animal during 10–12 of the Islamic month of Dhu al-Hajj to commemorate the way (sunnah) of Prophet Abraham.

al-‘adl Lit: Straightness, justice, fairness, equitableness. Tech: It consists of two elements: first, a sort of balance should be maintained among the people with respect to their rights; second, everyone should get what is due to him and pay what is due from him. What al-‘adl really demands is balance and proportion, rather than equal rights of citizenship. In certain respects, equality can be quite contrary to justice, such as in case of moral and social equality between parents and their children, or equality of remuneration between those doing higher services and those not so eminently engaged. What Allah has ordained is proportion and balance in the equality of rights. Al-‘adl requires that every person should be rendered all of his or her moral, social, economic, legal, political and civil rights. Al-‘adl is a mother virtue in the Muslim society. Individuals and society as a whole should observe justice in all their dealings. (Ant: al-ẓulm, which means to deprive someone of his rights.)

al-‘afāf Lit: Abstinence, virtuousness, decency, honesty. Tech: A state of contentment with whatever little one has and to appear rich with it despite being poor.

al-‘afw Lit: surplus. Tech: The expression appears in the Qur’an (2: 219) wherein people have been instructed to spend in the cause of Allah whatever is over and above their needs. Some people have also applied the concept of al-‘afw to the canons of taxation in the Islamic economy. According to them, the Islamic state should tax people on the income or wealth that is over and above the needs of the individuals.

agency-based contract for investments Relating to Islamic banks, refers to investment contracts where the investment account holders appoint the Islamic bank as agent for investing their funds for a specified fee and share of profit if it exceeds a certain level, the latter being an incentive for the Islamic bank to achieve a return higher than expected.

Agreement for...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• Preface to second edition
• Preface to first edition
• Transliteration of Arabic words and names
• Glossary