Glossary of Financial Terms: B


Bad Debt

A debt that is not collectible and is therefore worthless to the creditor.


Stands for “sale” or contract of sale. It is often used as a prefix in referring to different sales-based modes of Islamic finance, such as Murabaha, Istisna’a, and Salam.

Bai Al Amanat

Fiduciary sales like murabaha and wadi’ah.

Bai al Inhah

Buying an object for cash then selling it to the same party for a higher price whose payment is deferred so that the purchase and sale of the object serves as a ruse for lending on interest. It equates to a double sale by which the borrower and the lender sell and then resell an object between them, once for cash and once for a higher price on credit, with the net result of a loan with interest. Used by some Islamic banks, it refers to selling of an asset to the customer through deferred payments. At a later date, the bank will repurchase the asset and pay the client in cash terms.  Thus, Bai al Inah comprises two agreements; in the first agreement, the bank sells an identified asset to the customer at an agreed price and the customer can complete the purchase of bank’s asset by payment in installments over an agreed period; in the second agreement, the bank re-purchases the same asset from the customer at a lower price and on completion of the second transaction, the bank will pay the lump sum amount in immediate cash at the price agreed between them. The difference in the price is the bank’s profit, which is determined in advance. This arrangement is prohibited by the majority of Shari’ah scholars as it also equates to a sale and buy-back arrangement. Also known as Bay-al Inah or Inah. Similar to tawarruq however, in tawwaruq a third party is involved as an intermediary.

Bai al-Arbun

See Arbun.

Bai al-salam

See Salam.

Bai Baatel

See Batil.

Bai Bithaman Ajil (BBA)

This contract refers to the sale of goods on a deferred payment basis; a deferred payment sale.  Islamic banks use it as a mode of   financing for purchase and sale or deferred payment of consumer goods. Technically, this financing facility is based on the activities of buying and selling.   There is no interest charged. Equipment or goods required by the customer are purchased by the bank which subsequently sells the goods to the customer at an agreed higher price; payment is deferred and the customer is allowed to settle payment either by instalments or in a lump sum within a pre-agreed period. The deferred payment price which is the bank’s sale price includes a profit mark-up for the bank agreed by both parties.   Similar to a Murabaha contract, but with payment on a deferred basis known as Murabaha Muajjal.

Bai Mu’ajjal

Lit.: a credit sale or deferred payment contract. Technically, a financing technique adopted by Islamic banks, It is a contract in which the seller allows the buyer to pay the price of a commodity at a future date in a lump sum or in installments. The price fixed for the commodity in such a transaction can be the same as the spot price or higher or lower than the spot price. The concept is the same as Bai Bithaman Ajil (BBA).

Bai Salam

See Salam.

Bai wafa

Buy-back, sale and repurchase, a contract with the condition that when the seller pays back the price of goods sold, the buyer returns the goods to the seller.


See Sarf.

Baitl al-Mal

See Baitl Mal.

Baitl Mal

Treasury. Also known as Bayt al-Mal.

Bai´ al khiyar / Kiyar

See Khiyar. Option to rescind the sale.

Bai´ al Muqayaza

Exchange of goods with goods is called barter.

Bai´ al Mutlaq

Conclude a sale without any option to rescind.

Balance Sheet

Financial statement presenting measures of the assets, liabilities and owner’s equity or net worth of business firm or nonprofit organization as of a specific moment in time.




Null and void. Invalid sale or contract. One that does not fulfil the conditions relating to offer and acceptance, subject matter or the consideration and possession or delivery of the subject matter or involves some contravention of the Shari’ah, such as the involvements of ribagharar or qimar. Also termed as Aqd Batil and Bai Baatel. Opp. Sahih.


See Bai.

Bay al-dayn

Sale of debt. According to a large majority of fuqaha’, debt cannot be sold for money, except at its face value, but can be sold for goods and services.

Bay al-ina

See Bai al-Inah.

Bay al-kali bil kali

A sale in which both the delivery of the object  of sale and the payment of its price are delayed. It is similar to a modern forward  sale contract.

Bay al-mudaf

A sales contract in which delivery of both the commodity and the payment is deferred – for example forward sales in modern times. Such contracts are not permitted by the Shari’ah.

Bay bi thaman al-ajil

Another term used for Bai Mu’ajjal.

Bay muzayadah

Sales by auction.

Bay'al ayan

Sale of tangible objects such as goods (as  opposed to sale of services or rights).

Bay-al Inah

Also termed as  Bai ah Inah. Buying an object for cash then selling it to the same party for a higher price whose payment is deferred so that the purchase and sale of the object serves as a ruse for lending on interest. At a later date, the bank will repurchase the asset and pay the client in cash terms. Similar to tawarruq however in tawarruq a third party is involved as an intermediary.


Public Treasury in the Islamic State.

Bayu al-Gharar

Trading in risk, where the Arabic word gharar is taken to mean “risk”. See Gharar.

Bay’ al-Gharar

See Gharar.

Bridge Loan

Short-term loan to provide temporary financing until more permanent financing is available.