Glossary of Financial Terms: S



Charitable giving. An act of charity.

Sadaqah al zara'i

Prohibition of a deed which, if permitted, may lead to another prohibited deed.

Sadaqah jariyah

An act of charity with perennial benefits.


Valid, said of a contract. Opp. Batil.


In a wider sense, it refers to a loan which draws forth no profit for the creditor and is slightly different from Qard in that an amount given as Salaf cannot be called back before it is due; it includes loans for specified periods, i.e. short, intermediate and long-term loans. See Qard.

Literally, payment in advance with deferred delivery. Salaf is another name of Salam, a kind of sale where the price of the goods is paid in advance while the goods or the counter value is supplied in the future; thus the contract creates a liability for the seller top deliver the goods at the appointed time. See Salam.


See Salat.


A forward sale where the full price of the goods is paid in advance at the time of contract; the goods are not available for immediate delivery but can be delivered at a specified time in the future. In other words, a dvance purchase or a type of sale in which the full price of the goods is paid in advance and the goods are delivered later at a specified date in the future. It is similar to a modern forward sale contract. Under Shari’ah, a sale cannot normally be effected unless the goods are in existence at the time of the contract. However, this type of sale is an exception provided the goods are defined and the time of delivery is fixed. The exception was practiced in the early days of Islam to meet the needs of the small farmers in Arabia who required money to grow their crops and to feed their family until the time the crop could be harvested and sold; owing to the prohibition of riba they could not borrow money on interest; they were allowed to sell the agricultural produce in advance of cultivation for delivery later and take payment in advance. The object of the sale must be tangible goods that can be defined as to quantity, quality and workmanship. The mode of financing is often applied in the agricultural sector, where Islamic bank advances money without interest for various inputs and in exchange receives a share of the produce, which it then sells after delivery. To hedge against fall in prices, the bank can also sell the goods to a third party before delivery through a parallel contract of Salam. Salam covers all tangible goods which are capable of being definitely described as to quantity, quality and workmanship.


Obligatory prayers said five times a day, practiced by Muslims in supplication to Allah swt.

Sallalahu Alayhi Wassalam

Abbreviated as S.A.W. meaning “peace and blessing of God upon him” with reference to Prophet Muhammad. More frequent term used is pbuh.


Currency exchange. In pre-Islamic times it was exchange of gold for gold, silver for silver and gold for silver or vice versa. In Islamic jurisprudence such exchange is regarded as ‘sale of price for price’ (Bai al Thaman bil Thaman), and each price is consideration of the other. It also means sale of monetary value for monetary value in currency exchange, such as buying and selling of currencies.


Equal for equal (in exchange transactions).


A pledge made to secure the performance of a contract or the fulfillment of an obligation. Examples of securities include real estate, equipment stocks or a co-signer. Mortgages are a form of security with strong legal standing, because they are publicly registered following a formal legal procedure. A mortgage gives the lender holding a mortgage security the right to reclaim the asset being financed, if repayment is not made.

Senior Debt

Debt that must be repaid before a subordinated debt receives any payment in the event of default.


“One of the four well-known schools of thought in Islamic jurisprudence or religious law engaged in the interpretation of the Qur’an and Sunnah. Founded by one of the classical jurists, Imam Abdullah Muhammad ibn Idris al-Shafi’i (d. 804 AD), followers are known as Shafis. Others are HanbalisHanafis and Malikis. The Shafi’i school is considered the easiest school in terms of social and personal rules. Zahiri is another known school developed by Daud ibn Khalaf (d. 883 AD).

The Jafri Shia Islam school in Islamic jurisprudence was developed by Imam Ja’far al-Sadiq (d. 765) at about the same time its Sunni legal fiqh counterparts were being codified. It was distinguished from Sunni law on matters regarding inheritance, religious taxes, commerce, and personal status.”


See Shafi’is

Shari'ah Advisor

An independent Islamic scholars who advises Islamic financial institutions, providing guidance and supervision in the development of Shari’ah compliant products and maintaining Shari’ah compliant operations. Usually a classically trained Islamic legal scholar. While some Islamic financial institutions consult individual Shari’ah advisors, most establish a committee of Shari’ah advisors, often known as a Shari’ah Board or Shari’ah Supervisory Board. Also see Shari’ah Scholar.

Shari'ah Board

See Shari’ah Supervisory Board. Also known as Shari’ah Supervisory Committee.

Shari'ah Scholar

Islamic Shari’ah scholars who are well-versed with the necessary knowledge and competencies in the Shari’ah and its approaches to economic and financial issues.

Shari'ah Supervisory Board

An authority, usually a committee of Islamic scholars well-versed and competent in Shari’ah and its approaches to economics and finance, appointed by an Islamic financial institution, which supervises and ensures both the Shari’ah compliance of new product development and the operations.

The scholars should be independent and qualified to give rulings that pass moral judgment on proposed contracts and transactions as well as to ensure that business conducted is according to the requirements of the Shari’ah.    The committee is commonly referred to as a Shari’ah Board or Shari’ah Supervisory Board and also known as a Shari’ah Committee.


“Term used in Islamic finance to denote that a financial product or activity that complies with the requirements of the Shari’ah, for example Shari’ah compliant financing or Shari’ah compliant investment. Islamic finance derives its principles from the Shari’ah, which is based on the Qur’an and the Sunnah. The key defining characteristics in the application of Shari’ah to financing structures are that transactions should be based on tangible assets, and should not bear interest ( riba). The generation of profit is very much encouraged, and many commentators also identify risk sharing as being one of the quintessential features of any Islamic financing. Shari’ah principles also forbid uncertainty ( gharar), speculation or excessive uncertainty ( maysir) and gambling ( qimar), and well as activities in certain prohibited areas.


A partnership among the equal partners. Unlimited partnership.


Same as Sharikah-al-Abdan.


A partnership on the basis of credibility.


Often referred to as Islamic law. Shari’ah as a legal case did not exist at the time the Qur’an was revealed. It is a system that is all too often misunderstood and misinterpreted in the West. Refers to the rulings contained in and derived from The Quran and the Sunnah (sayings and living example of the Prophet Muhammad (pbuh). These cover every action performed by an individual or a society.  It is primarily concerned with a set of values that are essential to Islam and the best manner of their protection. The essential values of the Shari’ah include those of faith, life, intellect, lineage, property, protection of honour, fulfillment of contracts, preservation of ties of kinship, honouring the rights of one’s neighbour in so far as the affairs of this world are concerned, and the love of God, sincerity, trustworthiness and moral purity, in relationship to the hereafter.

The linguistic meaning of the word Shariah is a non-exhaustive source of water from which people satisfy their thirst. Thus, the linguistic significance of Shariah is that the Islamic rulings are effectively a source of guidance. As water is the fundamental basis for life, the Islamic rulings are an essential source for guiding human life.

The method of finding solutions to new issues in the light of the goals and principles of Islam are Ijtihad (independent reasoning), Ijma (consensus) and Qiyas (analogy), these solutions are all upheld and supported by  The Qur’an and the Sunnah.


Sharing, partner. A contract between two or more persons who launch a business or financial enterprise to make profit. In the present Islamic banking and finance terminology, Shirkah may include both Mudarabah and Mushara ah and variois other Musharakah-like business and commercial partnerships.


A contract between two or more persons who launch a business or financial enterprise to make profit. Generally, it is termed as ‘ shirkah’.


Partnership by ownership, which could be automatic as in the case of inheritance by e.g. two brothers, or optional such as two persons purchasing a property jointly (not for commercial purpose).


A a process that relies on the analysis of a lot of economic and financial data, companies’ financial reports, political decisions, information about management skills and aptitude and the personal profile of the decision maker. Financiers would call this as financial planning, budgeting, or investing. Finance is concerned with risk reduction. Speculation involves risk-taking.

Subordinated Debt (Junior Debt)

Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt-holders receive payment only after senior debt is paid in full. A subordination of security interest in property allows another creditor to have the rights to the proceeds of the sale of that property before the claim of the subordinated creditor.


See Suftajah.


A type of banking instrument used for the delegation of credit during the early Muslim period, especially the Abbasides period (749 to 1258 AD). It was used to collect taxes, disburse government dues and transfer funds by merchants and was commonly used by travelling merchants. It involved three parties: the payor, the payee and the transmitter. Suftajah could be payable on a future date or immediately. A suftajah held by one party could be endorsed to another party. The Arab merchants were using endorsements ( hawalah) since the days of Prophet Muhammad (pbuh). It differs from the modern bill of exchange in that a sum of money transferred by suftajah had to keep its identity and payment had to be made in the same currency.


A financial certificate. Similar characteristics to that of a conventional bond with the key difference being that they are assets backed; sukuk represent proportionate beneficial ownership in the underlying tangible asset(s) of particular projects or investment activity. Because the conventional interest-bearing bond structure is not permissible, the issuer of  sukuk sells an investor group the certificate, who then leases it back to the issuer for a predetermined return in the form of rental charges . The issuer also makes a contractual promise to buy back the bonds at a future date at par value. Sukuk must be able to link the returns and cash flows of the financing to the assets purchased, or returns generated from an asset purchased. This is because trading in debt is prohibited by the Shari’ah; as such, financing must only be raised for identifiable assets.


Literally, custom, habit or way of life. Commonly understood as the sayings and living example of the Prophet Muhammad (pbuh) as recorded in the books of HadithSunnah is a legislative source along with The Qur’an; The Qur’an cannot be understood without the application of Sunnah.


It refers to ” Subhanahu wa-ta’ala“, an Islamic Arabic phrase meaning, “glorious and exalted is He ( Allah).” The phrase (often abbreviated to ” swt“) appears after the name of Allah in Islamic texts such as the Qur’an and the Hadith. Saying this phrase is seen as an act of reverence and devotion towards Allah among Muslims