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Glossary

Ijarah (Operating Lease)
Ijarah means leasing of asset pursuant to a contract under which a specified permissible benefit in the form of a usufruct is obtained for a specified period in return for a specified permissible consideration. It is a manfaah (usufruct) type of contract whereby a lessor (owner) leases out an asset to its customer 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.
Commonly used for: KFH Automobile Financing-i, KFH Vehicle Financing-i, KFH Project Financing-i, KFH Contract Financing-i, KFH Asset Acquisition Financing-i, KFH Asset Backed Financing-i.
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  • Ijarah Muntahiah Bi Tamlik (Financial Lease)
    Ijarah Muntahiah Bi Tamlik has similar rules to the ordinary Ijarah except that in the latter, it is associated with a promise by the lessor to transfer ownership at the end of the Ijarah period via a separate sale agreement or gift.
    Commonly used for: KFH Project Financing-i, KFH Contract Financing-i, KFH Asset Acquisition Financing-i, KFH Asset Backed Financing-i
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  • Ijarah Mausufah Fi Zimmah (Forward Lease)
    Ijarah Mausufah Fi Zimmah means an ijarah contract which is executed for an asset undertaken by the lessor to be delivered to the lessee according to accurate specifications, even if the asset is not owned by the lessor. During the period that the leased asset/property is under construction, the lessor may ask the lessee to pay a certain portion of pre agreed lease rental as a forward lease. The forward lease rental payment will be considered as a debt to the lessor until the delivery of the leased asset to the lessee. Ijarah Mausufah Fi Zimmah can be in a form of Ijarah or Ijarah Muntahiyah Bi Tamlik.
    Commonly used for: KFH Home Financing-i, KFH Asset Acquisition Financing-i
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  • Istisna'a (Purchase Order)
    Istisna'a means a purchase contract of an asset whereby a buyer will place an order to purchase the asset which will be delivered in the future. In other words, the buyer will require a seller or a contractor to deliver or construct the asset that will be completed in the future according to the specifications given in the sale and purchase contract. Both parties of the contract will decide on the sale and purchase prices as they wish and the settlement can be delayed or arranged based on the schedule of the work completed.
    Commonly used for: KFH Home Financing-i (property under construction), KFH Project Financing-i, KFH Contract Financing-i, KFH Asset Financing-i
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  • Mudharabah (Profit Sharing)
    Mudharabah means partnership in profit whereby one party provides capital (rabb al-mal) and the other party acts as an entrepreneur (mudharib) who solely manages the project. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio. In the event of a business loss, the loss shall be borne solely by the provider of the capital unless it is due to the misconduct or negligence of the mudharib.
    Commonly used for: KFH Project Financing-i, KFH Contract Financing-i, KFH Working Capital Financing-i, KFH Asset Financing-i, KFH Savings Account-i, KFH General Investment Account-i, KFH Foreign Currency General Investment Account-i.
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  • Musyarakah (Partnership / Profit And Loss Sharing)
    Musyarakah means partnership. Musyarakah refers to the commingling of capital provided by the partners for the purpose of sharing in profit. Musyarakah is established by means of an agreement or arrangement whereby two or more persons agree that each of them contributes to the capital of the partnership either in the form of cash or in kind and shares in its profit and loss. Any profit derived from the venture will be distributed based on a pre-agreed profit sharing ratio, but a loss will be shared on the basis of equity participation.
    Commonly used for: KFH Project Financing-i, KFH Contract Financing-i. KFH Working Capital Financing-i, KFH Asset Financing-i
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  • Musyarakah Mutanaqisah (Diminishing Partnership)
    Musyarakah mutanaqisah or diminishing partnership is a form of Musyarakah (partnership) in which one of the partner promises to purchase the equity share of other partner gradually until the title of the equity is completely transferred to him. This transaction starts with the formation of partnership, after which buying and selling of the equity take place between the two partners. One partner may lease his share of the asset to the other partner on Ijarah (lease) basis. The partnership will come to an end with one partner being the sole owner of the asset or business venture.
    Commonly used for: KFH Musyarakah Mutanaqisah Home Financing-i, KFH Project Financing-i, KFH Contract Financing-i
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  • Murabahah (Cost Plus Profit Sale)
    Murabahah means cost plus profit sale and it is a trust sale. It refers 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 by all parties involved. The settlement for the purchase can be either on a cash basis, a deferred lump sum basis or on an instalment basis, which will be specified in the agreement.
    Commonly used for: KFH Home Financing-i, KFH International Commodity Murabahah Deposit-i. KFH Project Financing-i, KFH Contract Financing-i, KFH Working Capital Financing-i, KFH Asset Financing-i, KFH Automobile Financing-i, KFH Letter of Credit-i
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  • Wakalah (Agency)
    Wakalah is a contract of agency which gives the power to a person to nominate another person to act on his behalf as long as he is alive based on the agreed terms and conditions.
    Commonly used for: KFH Letter of Credit-i
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  • Kafalah (Guarantee)
    The Shariah principle of guarantee whereby the guarantor will guarantee the performance, action and undertaking to 3rd party. The guarantor will underwrite any claim and obligation that should be fulfilled by the principal. This concept is also applicable to a guarantee provided on a debt transaction in the event a debtor fails to fulfill his debt obligation. The same definition can be applied for Dhaman
    Commonly used for: KFH Bank Guarantee-i
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  • Qardh (Benevolent Loan)
    Qardh means non-interest bearing loan or benevolent loan which refers to a loan given by a person (lender) to the borrower without any expectation of extra returns. The borrower is only obliged to pay the loan at its original amount to the lender within the agreed stipulated period of time.
    Commonly used for: KFH Current Account-i, KFH Savings Account-i, KFH Foreign Currency Current Account-i, KFH General Investment Account-i, KFH Foreign Currency General Investment Account-i.
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