- Deferred-payment Sale [ Bai’ Bithaman Ajil (BBA)]
A contract referring to the sale and purchase transaction for the financing of an asset on a deferred and instalment basis with a pre-agreed payment period. The sale price includes a profit margin.
- Sale with Immediate Repurchase [ Bai’ ‘Inah ]
A contract involving the sale and buy-back transaction of an asset by a seller. A seller sells the asset to a buyer on a cash basis. The seller immediately buys back the same asset on a deferred payment basis at a price higher than the cash price. It is also applied when a seller sells the asset to a buyer on a deferred basis. The seller later buys back the same asset on a cash basis at a price lower than the deferred price.
- Supply Sale [ Bai’ Istijrar ]
A contract between a client and a supplier, whereby the supplier agrees to supply a particular product on an ongoing basis, e.g. monthly, at an agreed price and an agreed mode of payment.
- Advance Purchase [ Bai’ Salam ]
A sale and purchase contract whereby the payment is made in cash at the point of contract but the delivery of the asset purchased is deferred to a pre-determined date.
- Sale and Repurchase [ Bai’ Wafa’ ]
A contract with the condition that when the seller pays back the price of goods sold, the buyer returns the goods to the seller.
- Leasing [ Ijarah ]
A manfaah (usufruct) type of contract whereby a lessor (owner) leases out an asset or an equipment to its client at an agreed rental fee and pre-determined lease period upon the `aqad (contract). The ownership of the leased equipment remains in the hands of the lessor.
- Lease to Purchase [ Ijarah Thumma Bai` ]
A contract which begins with an ijarah contract for the purpose of renting out a lessor’s asset to a lessee. Consequently, at the end of the lease period, the lessee purchases the asset at an agreed price from the lessor by executing a purchase (bai’) contract.
- Purchase Order [ Istisna’]
A purchase contract of an asset whereby a buyer places an order with the seller to purchase the asset to be constructed or delivered in the future according to the specifications given in the contract. Both parties of the contract decide on the sale and purchase prices and the settlement can be delayed or arranged based on the schedule of the work completed.
- Profit-sharing [ Mudharabah ]
A contract made between two parties to finance a business venture. The parties are a rabb al-mal or investor who solely provides the capital and a mudharib or entrepreneur who solely manages the project. If the venture is profitable, the profit is distributed based on a pre-agreed ratio. If there is loss, it will be borne solely by the provider of the capital.
- Cost-plus Sale [ Murabahah ]
A contract referring to the sale and purchase transaction for the financing of an asset whereby the cost and profit margin (mark-up) are made known and agreed upon by all parties involved. The settlement for the purchase can either be on a deferred lump sum basis or instalment basis, which is specified in the agreement.
- Profit and Loss-sharing [ Musyarakah ]
A partnership arrangement between two parties or more to finance a business venture whereby all parties contribute capital either in the form of cash or in kind for the purpose of financing the business venture. Any profit derived from the venture is distributed based on a pre-agreed profit sharing ratio, but a loss is shared on the basis of equity participation.
- Benevolent Loan [ Qardh Hasan ]
A contract of loan between two parties for social welfare or to fulfil a short-term financial need of the borrower. The amount of repayment must be equivalent to the amount borrowed. It is however legitimate for a borrower to pay more than the amount borrowed as long as it is not stated or agreed at the point of contract.