Being deeply embedded in today’s capitalist systems, it can be hard to imagine what an alternative economic system might look like in practice. It’s not easy to challenge ideas we’ve grown used to, especially when we haven’t seen real alternatives in action.
I’ve put together a glossary of Islamic finance terms I’ve come across in my readings organised by theme. Of course, there is more, I just forget to add them all as i read.
Hope you find it helpful!
Shari’ah – Islamic law derived from the Qur’an and Sunnah; governs what is permissible (halal) in finance.
Fiqh al-Muʿāmalāt – Jurisprudence related to economic and commercial transactions.
Riba – Prohibition of interest; central to avoiding exploitative gains.
Gharar – Avoidance of excessive uncertainty or ambiguity in contracts.
Maysir – Prohibition of speculation/gambling.
Zakat – Mandatory almsgiving (2.5% on qualifying assets); can be institutionalized as a public finance tool.
Waqf – Endowment of assets for charitable or public purposes; used in financing education, health, etc.
Sadaqah – Voluntary charity; less formal but can complement social protection spending.
Bayt al-Mal – Treasury in classical Islamic governance; historically managed public revenues including zakat, taxes, spoils, etc.
Sukuk – Shari’ah-compliant bonds structured as asset-backed or lease-based instruments; used in sovereign and sub-national finance.
Istisna’ – A forward contract for manufacturing or construction; used in infrastructure financing (schools, roads, etc.).
Ijārah – Lease contract; used in sukuk structures or public-private partnerships (PPPs).
Murābaḥah – Cost-plus financing; less ideal for sovereign use but occasionally used by public institutions.
Mushārakah – Joint venture structure; government can co-invest in public goods with private sector.
Muḍārabah – Profit-sharing model; can be explored in public investment funds.
Social Protection
Qard al-Hasan – Benevolent loan with no interest; used in cash assistance or rotating funds.
Takaful – Islamic insurance based on mutual guarantee; can be used in public pension or disaster insurance.
Kafālah – Guarantee or sponsorship; relevant in risk-sharing or underwriting state support to vulnerable groups.
Māl al-Mashā’ – Common/public wealth; supports arguments for communal ownership of resources and public benefit.
Hisbah – Market regulation and public oversight institution; relevant to accountability and fiscal ethics.
Maqāṣid al-Sharīʿah – Objectives of Shariah (preservation of life, wealth, intellect, etc.); framework for aligning budgets with human development.