The words, explained: riba
115 terms from Islamic finance, zakat, inheritance and UK money, each in plain English.
A
AAOIFI
The Accounting and Auditing Organization for Islamic Financial Institutions, a Bahrain-based body that sets Shariah, accounting and governance standards used by many Islamic banks.
Acquisition payment
The part of a home purchase plan payment that buys more of the provider’s share of the home.
AER
Annual equivalent rate: a yearly figure that lets you compare accounts that pay at different times.
Alternative property finance relief
Rules that stop stamp duty being charged twice when a provider buys a home with you under a home purchase plan.
Amil
Someone appointed to collect and distribute zakat. Amils are one of the eight groups that can be paid from it.
Asabah
Also: residuary heirsResiduary heirs, who take what’s left after the fixed shares. They’re the nearest male relatives on the father’s side, such as sons, the father and brothers, with daughters and sisters alongside them in some cases.
Ashab al-furud
Also: fixed-share heirsHeirs with a fixed share set in the Qur’an, such as a spouse, parents and daughters.
Asnaf
The eight groups who can receive zakat, named in the Qur’an (9:60). They include the poor, the needy, people in debt and travellers in need.
Auto-enrolment
The UK rule that puts most employees into a workplace pension, with an employer contribution, unless they opt out.
Awl
Also: ’awlReducing every share in proportion when the fixed shares add up to more than the whole estate.
B
Bank Rate
Also: base rateThe Bank of England’s main interest rate. Islamic banks don’t pay interest, but their rates tend to follow the wider market it sets.
Bay al-inah
Also: bai al-inahSelling something and immediately buying it back at a different price. Most scholars reject it as a loan in disguise.
Bond
A loan to a government or company that pays interest. Conventional bonds aren’t shariah compliant, which is why sukuk exist.
Buy-to-let
Buying a property to rent out. Buy-to-let home purchase plans generally aren’t regulated by the FCA in the way plans for your own home are.
C
Capital gains tax
Also: CGTTax on the profit when you sell something that has gone up in value, such as shares outside an ISA or a second property.
Cash ISA
An ISA that holds savings. Islamic banks offer versions that pay expected profit instead of interest.
Commodity murabaha
Also: reverse murabahaA chain of commodity trades, often in metals, that banks use to move money and create a fixed return. Some savings and finance products rely on it.
Compounding
Growth building on earlier growth. It doesn’t need interest: profits and rising share prices compound too.
Current account
An everyday bank account for pay and bills. Islamic versions don’t pay interest and are often run as a qard or wadiah.
D
Default fund
Where a workplace pension invests your money if you don’t choose. It generally isn’t built with shariah in mind.
Defined benefit
Also: DB, final salaryA pension that pays an income based on your salary and years of service, rather than a pot.
Defined contribution
Also: DC, money purchaseA pension that builds a pot from what goes in and how it grows. Most workplace pensions now work this way.
Dhawu al-arham
Also: distant kindredRelatives such as a daughter’s children or a mother’s brother, who inherit only when there are no fixed-share heirs other than a spouse, and no residuary heirs.
Diminishing musharaka
Also: diminishing musharakah, co-ownershipA partnership in an asset where one partner buys out the other in stages. Most UK home purchase plans use it.
Diversification
Spreading money across many investments, so one failure can’t sink you.
Dividend
A share of a company’s profit paid to its shareholders.
E
Early settlement charge
Also: early repayment chargeA fee some providers charge if you pay off a plan, or overpay too much, during a fixed period.
Easy access account
Also: instant accessA savings account you can take money out of whenever you like.
Equity
Also: shares, stocksOwning part of a company, usually through shares.
ETF
Exchange-traded fund: a fund you buy and sell on a stock market like a share.
Executor
The person named in a will to carry out its instructions.
Expected profit rate
Also: EPRWhat an Islamic savings account says it expects to pay you, in place of an interest rate. It isn’t guaranteed in the way interest is.
F
Faraid
Also: mirath, Islamic inheritanceThe Islamic rules of inheritance, which set fixed shares for close family.
Fatwa
A scholar’s considered opinion on a religious question. In finance, it’s often how a product’s approval is written down.
FCA
The Financial Conduct Authority, which regulates how UK financial firms treat customers.
Fidyah
A payment to feed a person in need for each fast someone can’t make up, for example through long-term illness.
Finance to value
Also: FTVThe share of the property price the provider funds. The home purchase plan version of loan to value.
Fiqh
Islamic jurisprudence: scholars’ detailed understanding of the rulings. The part dealing with trade and money is called fiqh al-mu’amalat.
Fixed term deposit
Also: fixed rate bondA savings account that locks your money away for a set time, usually for a better rate.
FSCS
The Financial Services Compensation Scheme. It protects eligible deposits up to £120,000 per person, per banking licence, if a UK bank fails.
G
Gharar
Excessive uncertainty in a contract, such as selling something you don’t own or can’t deliver. Serious gharar makes a contract invalid, while small, unavoidable uncertainty is tolerated.
Gift Aid
A UK scheme that lets a charity claim 25p from HMRC for every £1 a UK taxpayer gives, at no cost to the donor.
H
Hajb
Exclusion from inheriting by a closer relative, as when a son blocks a brother.
Halal
Permitted under Islamic law.
Haram
Forbidden under Islamic law.
Hawl
The full lunar year, about 354 days, that wealth at or above the nisab must last before zakat is due.
Hibah
Also: hibaA gift made during your lifetime. It isn’t limited to a third, but scholars urge fairness, especially between children.
Home purchase plan
Also: HPP, Islamic mortgage, halal mortgageThe product usually called an Islamic mortgage. You and a provider buy the home together, then you buy its share over time and pay rent on the rest.
I
Ijara
Also: ijarah, leaseA lease. The owner rents out an asset and carries the main risks of owning it. In home finance, it’s the rent you pay on the provider’s share.
Ijara wa iqtina
Also: lease to ownA lease that ends with the asset passing to you. Also called ijara muntahia bittamleek.
Index fund
Also: tracker fundA fund that tracks a list of companies rather than having a manager pick them. Islamic versions track a Shariah-screened index.
Inheritance tax
Also: IHTTax on an estate above certain limits. Gifts to a spouse are generally exempt, so Islamic shares to other heirs can change the bill.
Intestacy
Dying without a valid will. The law, not your wishes or Islamic shares, then decides who inherits.
ISA
Individual Savings Account: a UK tax wrapper. What it earns is tax free, but the wrapper says nothing about whether what’s inside is halal.
Islamic window
A part of a conventional bank that offers Islamic products.
Istisna
Also: istisna’aA contract to make or build something, with the price agreed upfront and often paid in stages.
K
Kaffarah
Also: kaffaraThe expiation for deliberately breaking a Ramadan fast without a valid reason: fasting 60 days in a row or, if that isn’t possible, feeding 60 people in need.
L
Lasting power of attorney
Also: LPAA legal document letting someone you trust make decisions for you if you lose the capacity to make them yourself.
Lifetime ISA
Also: LISAAn ISA with a government bonus for a first home or later life. Age limits and withdrawal charges apply, so check the rules on GOV.UK.
Lillah
A donation given purely for the sake of God. UK charities use it for general gifts that, unlike zakat, can fund any good cause.
M
Madhhab
Also: madhab, school of thoughtA school of Islamic law. The four main Sunni schools are the Hanafi, Maliki, Shafi’i and Hanbali. They agree on most finance rules and differ on some details.
Mahr
Also: dowryThe gift a husband must give his wife on marriage. Any part still unpaid is a debt on his estate.
Makruh
Disliked but not forbidden. Some scholars use it for borderline financial practices.
Market capitalisation
Also: market capA company’s total value on the stock market: its share price times the number of shares.
Maysir
Also: maisir, qimarGambling, or gain that depends purely on chance. It’s one reason scholars question conventional insurance and some derivatives.
Mudaraba
Also: mudarabah, profit sharingA partnership where one side brings the money and the other the work. Profit is shared as agreed, and a financial loss falls on the side that brought the money, unless the manager was negligent.
Mudarib
The partner in a mudaraba who manages the money. In a savings account, that’s the bank.
Murabaha
Also: murabahahA cost-plus sale. The bank buys something you want and sells it to you at a price that includes a profit it tells you upfront, often paid in instalments.
Musharaka
Also: musharakahA joint venture where both sides put in money. Profit is shared as agreed, and losses in line with what each put in.
N
Nikah
The Islamic marriage contract. In England and Wales, a nikah on its own may not create a legally recognised marriage.
Nisab
The threshold at which zakat applies: 87.48g of gold or 612.36g of silver, valued at today’s price.
Notice account
A savings account where you give a set number of days’ warning before taking money out.
O
Ongoing charge
Also: OCFThe yearly cost of running a fund, shown as a percentage on its factsheet.
Overdraft
Borrowing from your bank by spending more than is in your account. Conventional overdrafts charge interest.
P
Pension tax relief
Tax back on what you pay into a pension, at your income tax rate, within yearly limits.
Personal allowance
The income you can have each year before paying income tax. It’s £12,570 for most people in 2026/27.
Personal savings allowance
The savings income, including expected profit, you can earn each year before paying tax. How much depends on your tax band.
Platform fee
What a provider charges to hold your investments in an account.
Pound-cost averaging
Investing a fixed amount regularly, so you buy more when prices are low and less when they’re high.
PRA
The Prudential Regulation Authority, part of the Bank of England, which supervises banks’ safety.
Probate
The legal right to deal with someone’s estate, which executors usually need before they can sell property or close accounts.
Purification
Also: tathirGiving to charity the small part of an investment’s income that came from impermissible sources, such as interest.
Q
Qard
A loan repaid in the same amount, with nothing extra agreed. Many Islamic current accounts are a qard from you to the bank.
Qard hasan
Also: qard al-hasan, benevolent loanAn interest-free loan given as a kindness, repaid in the same amount.
Qurbani
Also: udhiyah, qurbaniThe animal sacrifice at Eid al-Adha. Many UK Muslims pay a charity to carry it out abroad.
R
Rabb al-mal
The partner in a mudaraba who provides the money. In a savings account, that’s you.
Radd
Returning a surplus to the heirs with fixed shares when no residuary heir is left. The Hanafi school doesn’t return it to a spouse while other heirs remain.
Rental payment
The part of a home purchase plan payment that pays rent on the share of the home you don’t yet own.
Retakaful
Cover that takaful operators buy to protect themselves, as reinsurance does for insurers.
Riba
Also: interest, usuryAny increase charged on a loan or debt, usually translated as interest or usury. The Qur’an prohibits it, and avoiding it is why most Islamic finance products exist.
S
Sadaqah
Also: sadaqaVoluntary charity, given at any time and to anyone, separate from zakat.
Sadaqah jariyah
Charity whose benefit keeps going, such as a well, a school or a waqf.
Salam
A sale where the full price is paid now for goods delivered on a set future date, traditionally crops.
Self Assessment
The tax return some people file each year, for example to report untaxed income or claim higher rate relief on Gift Aid.
Shariah
Also: sharia, shari’ahIslamic law and guidance. In finance, it’s the standard a product is checked against.
Shariah board
Also: Shariah supervisory boardA panel of scholars who review a bank’s or fund’s products and confirm whether they comply.
Shariah screening
Also: halal stock screeningChecking a company’s business and accounts against set limits, such as AAOIFI’s 30% debt test, to decide whether its shares are permissible.
SIPP
Self-invested personal pension: a pension where you choose from a wide range of investments, including shariah funds.
Standard variable rate
Also: SVRThe rate you move to when a fixed deal ends, which the provider can change.
State Pension
A regular payment from the government once you reach State Pension age. The amount depends on your National Insurance record.
Sukuk
Also: Islamic bondsCertificates that give holders a share in an asset or project, paid from what it earns. Often called Islamic bonds, though they’re structured differently.
T
Tabarru
Also: tabarru’A donation. In takaful, members’ contributions are treated as donations to the shared fund.
Takaful
Also: Islamic insuranceAn Islamic alternative to insurance. Members contribute to a shared fund that pays claims, and an operator runs it for a fee or a share of profit.
Tawarruq
Also: organised tawarruqBuying a commodity on deferred payment and selling it straight away for cash, to raise money. The International Islamic Fiqh Academy ruled the organised form impermissible in 2009, while other scholars allow it with conditions.
Tax-free lump sum
The part of a pension you can usually take tax free, normally up to a quarter, within an overall limit.
U
Ujrah
A fee for a service, such as an agent’s fee in a wakala or an operator’s fee in takaful.
V
Volatility
How much and how quickly an investment’s price moves up and down.
W
Wadiah
Also: wadi’ahMoney held in trust for safekeeping. Some banks use it for current accounts.
Wakala
Also: wakalah, agencyAn agency. You appoint someone, such as a bank, to invest or act for you in return for a fee. Many UK savings accounts use it.
Waqf
Also: awqafA charitable endowment. An asset is set aside for good and its income goes to a cause.
Wasiyyah
Also: wasiyya, bequestA bequest in a will of up to a third of the estate, after debts, to people who don’t inherit or to charity.
Z
Zakat
An obligation on Muslims whose qualifying wealth reaches the nisab and stays there for a lunar year. It is commonly 2.5% of that wealth, paid to the groups named in the Qur’an (9:60).
Zakat al-fitr
Also: fitrana, sadaqat al-fitrA set payment for each member of a household, given before the Eid prayer at the end of Ramadan so people in need can celebrate too.
Zakatable assets
Wealth that counts for zakat: cash, gold and silver, trade goods, shares, and money owed to you that you expect back. Your home, car and personal belongings don’t count.
Nothing matches that yet. Tell us the word and we’ll add it.
Scholars and banks can use these words differently, so treat these as starting points. General information, not a ruling or advice. Take anything you’re unsure about to a scholar you trust.