A lexicon of Islamic finance
Murabaha, or cost-plus financing, replaces interest with a flat fee that is agreed upon by both buyer and seller. It is used instead of a traditional mortgage.
The charging of interest—or riba —in any form, regardless of the rate, is forbidden by the Koran; it is considered profiting from those in need.
Takaful systems—an insurance alternative—are structured as pools of money in which losses are evenly distributed.
Shariah, the Islamic legal code drawn from the Koran and sayings of the Prophet Muhammad, advises on everything from dietary law to penalties for theft.
A sukuk involves creating a legal entity around a specific asset, like a building, that creates returns and distributes payments similar to those of a Western-style bond.