NIB Glossary

A cost-plus financing arrangement where the NIB institution purchases an asset and sells it to the client at a disclosed profit margin. The total price is fixed at the outset and paid in installments.

The Arabic term for interest or usury. In Islamic law, riba refers to any predetermined, fixed return on a financial transaction — most commonly interest on loans. It is strictly prohibited in NIB.

Excessive uncertainty, ambiguity, or risk in a contract. In NIB, all contracts must have clearly defined terms — price, quantity, quality, and delivery must be certain. Contracts with gharar are void.

A profit-sharing partnership where one party provides capital (Rabb ul Mal) and the other provides expertise and management (Mudarib). Profits are shared per a pre-agreed ratio; losses fall on the capital provider unless the manager was negligent.

A leasing arrangement in which the NIB institution purchases an asset and leases it to a client for a specified period in exchange for rental payments. The institution retains ownership and bears ownership-related risks.

A joint venture or partnership where all parties contribute capital. Profits are shared according to a pre-agreed ratio, and losses are shared in proportion to each party's capital contribution.

Certificates of ownership in an underlying asset, usufruct, services, or investment. Sukuk are the Shariah-compliant alternative to conventional bonds. Holders are entitled to returns from the underlying asset's performance, not fixed interest.

A cooperative insurance system where participants mutually contribute to a shared fund to cover potential losses. Based on mutual assistance and solidarity, not risk transfer for profit.

The obligatory annual wealth purification payment for eligible Muslims. Equal to 2.5% of qualifying assets held above the Nisab threshold for one lunar year. One of Islam's Five Pillars.

A voluntary, perpetual Islamic endowment. Once assets are dedicated as Waqf, they cannot be sold, inherited, or gifted. Their benefits are directed to the specified charitable purpose in perpetuity.

Permissible or lawful according to Islamic law (Shariah). In finance, 'halal' refers to activities, products, and transactions that comply with Shariah principles.

Forbidden or prohibited under Islamic law. In finance and business, haram activities include dealing in interest, alcohol, pork, pornography, gambling, and weapons of mass destruction.

The minimum threshold of wealth above which Zakat becomes obligatory. Calculated as the value of either 85 grams of gold or 595 grams of silver — whichever is lower (silver Nisab is typically used).

Islamic law derived from the Quran and Sunnah (Prophet's teachings). In finance, Shariah principles govern all NIB products and activities, requiring asset-backing, risk-sharing, and prohibition of interest and excessive uncertainty.

An agency arrangement where one party (the Wakeel/agent) acts on behalf of another (the Muwakkil/principal) for a defined purpose. In NIB, used for investment accounts where the bank acts as agent to invest depositors' funds.

Gambling or speculation. Any transaction where the outcome is purely based on chance or speculation is prohibited in NIB. This prohibition affects conventional derivatives, options, and speculative trading.