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Concepts in Islamic Banking (Part 1)

1. al-Wadiah Yad Dhamanah (Savings With Guarantee)

Refers to goods or deposits that have been deposited with another person for safekeeping. Depositors give
their consent to the bank to deal with the whole or any part of their monies in the manner that the bank
deems fit, so long as it is not against syariah.

The bank will guarantee repayment of the whole sum or any outstanding part in the depositor account
when demanded. The bank may provide a return to depositors as a token of appreciation for keeping their
money with the bank.

2. Al-Mudharabah (Profit Sharing)

An agreement made between a party who provides the capital and an entrepreneur to enable the latter to
carry out business projects on a profit sharing basis at a pre-determined ratio. Losses are to be borne by
the provider of funds.

3. Bai’ Bithaman Ajil (Deferred Payment Sale)

The sale of goods on a deferred payment basis at an agreed price. It provides protection against interest
rate fluctuations. The financing allows customers to purchase or refinance the property to obtain extra
funds for various purposes such as for their children ’s education, house renovation, business expansion or
just to obtain extra funds.

4. Al-Musyarakah (Joint-Venture)

A partnership for a specific business with a profit motive. Profit distribution will be allocated according to
an agreed ratio. In the event of losses, both parties will share the losses based on their equity participation.

5. Al-Murabahah (Cost-Plus)

The sale of goods at an agreed price. Such as sales contract is valid on condition that the price, other costs,
and the profit margin of the seller are stated at the time of the agreement of sale.

6.Bai’ al-Dayn (Debt Trading)

Debt financing refers to providing financial resources for production, commerce and services through the
sale or purchase of trade documents and papers. Only documents evidencing real debts arising from bona
fide merchant transactions can be traded.

7. Al-Ijarah (Leasing)

An arrangement under which one leases equipment, building or other facility to a client at an agreed rate
against a fixed charge, as agreed by both parties.

8. Al-Qardhul Hassan (Benevolent Loan)

An interest-free loan. The borrower is only required to repay the principal amount borrowed, but he may
pay an extra amount at his absolute discretion as a token of appreciation.
9. Bai’ As-Salam (Future Delivery)

An agreement whereby payment is made immediately while goods are delivered at an agreed late date. It
is equivalent to an advance payment.

10. Bai’ al-Istijrar (Supply Contract)

An agreement between the client and the supplier whereby the supplier agrees to supply a particular
product on an on-going basis, for example monthly, at an agreed price and on the basis of an agreed mode
of payment

11. Al-Kafalah (Guarantee)

Guarantee provided by a person to the owner of goods who has placed his goods with a third party,
whereby the guarantor and the third party may must meet any subsequent claim by the owner of the goods.

12. Ar-Rahnu ( Collateralised borrowing)

An arrangement whereby a valuable asset is placed as collateral for debt. The collateral may be disposed
on in the event of default.

13. Al-Wakalah (Nominating another person to act)

A situation where a person nominates another person to act on his behalf.

14. Al-Hiwalah (Remittance)

A transfer of funds or debt from the depositor’s or debtor’s account to the receiver’s or creditor’s account.
A commission may be charged.

15. As-Sarf (Foreign Exchange)

The buying and selling of foreign currencies.

16. Al-Ujr (fee)

Commissions or fees charged for services

17. Al-Hibah (Gift)

Gift awarded voluntarily in return for a loan given


Affin Bank
Al-Mudharabah is a contract made between a depositor who acts as "the provider of capital" and the
bank who acts as "the entrepreneur". The amount deposited for a stipulated period by the depositor will be
used by the bank for investment purposes according to the Al-Mudharabah principle.

All profits earned will be shared between the depositor and the bank in the ratio of 75:25. Profits will be
declared monthly.

A minimum deposit of RM5,000 for one month and 2 months deposit and RM500 for three months and
above is needed. Dividends will be paid upon maturity based on the monthly declared rate.

This account is eligible to all individuals, Government Departments, partnerships, firms, corporations,
societies, associations and other business enterprises. For individuals below 15 years of age, the account
shall be opened in the name of the guardian.

Bank Muamalat
Al-Wadiah Savings-i

Product Description :
It is a savings account based on Islamic contract of Al Wadiah. Al Wadiah refers to a concluded contract
between the owner (depositor) of the goods (the money) and the custodian (Bank) for safekeeping. The
depositor grants the Bank their permission to utilize the money for whatever purpose permitted by
SYARIAH. The Bank in return guarantees the value of the deposit thus creating a Wadiah Yad-Dhamanah
contract.
Al-Wadiah Current-i

Product Description :
It is a current account based on the Islamic contract of Al Wadiah. Al Wadiah refers to a concluded
contract between the owner (depositor) of the goods (the money) and the custodian (Bank) for safe-
keeping. The depositor grants the Bank their permission to utilize the money for whatever purpose
permitted by SYARIAH. The Bank in turn guarantees the value of the deposit thus creating a 'Wadiah
Yad-Dhamanah' contract