This glossary defines the Islamic finance terms that recur in Shariah-compliant share financing on Bursa Malaysia. It covers the prohibited elements a compliant structure is built to avoid — riba, gharar, and maysir — the sale-based contracts used instead — murabahah, commodity murabahah, and tawarruq — and the framework that governs eligibility: the Shariah Advisory Council, Shariah screening, and the list of Shariah-compliant securities. Each term carries its own anchor so it can be cited individually.
These are working definitions written for shareholders and advisers, not formal Shariah definitions. Whether a particular structure achieves compliance is a matter for qualified Shariah advisers; the terms below are the vocabulary in which that question is discussed. For how the pieces fit together in practice, see our notes on commodity murabahah and the Shariah Advisory Council. The broader Bursa financing lexicon is in the main glossary.
Key takeaways
- Three things to avoid. Riba (interest), gharar (excessive uncertainty), and maysir (gambling) are the elements a Shariah-compliant facility is structured to exclude.
- Sale, not lending. Murabahah is a disclosed cost-plus sale; commodity murabahah applies it to a commodity, and tawarruq is its cash-raising use.
- Profit, not interest. The return is a profit rate — fixed and known at the outset — rather than interest accruing on money advanced.
- The framework governs eligibility. The Shariah Advisory Council runs the Shariah screening that produces the list of Shariah-compliant securities.
- Advisers determine compliance. These are working definitions; whether a structure is compliant is confirmed by qualified Shariah advisers.
Prohibited elements
Riba
Interest or usury — a predetermined charge for the use of money over time. Riba is prohibited in Islamic finance, which is why a Shariah-compliant facility grounds its return in the sale of an asset rather than in lending money at interest.
Gharar
Excessive uncertainty or ambiguity in a contract's essential terms. Islamic finance requires that the subject matter, price, and obligations be clear and defined, which is why a compliant structure fixes the amount to be repaid at the outset.
Maysir
Gambling or speculative gain obtained by chance rather than by genuine economic activity. Like riba and gharar, maysir is among the elements a Shariah-compliant structure is built to avoid.
Sale-based contracts
Murabahah
A cost-plus sale in which the seller discloses the cost of an asset and a mark-up, and the buyer pays the total, often on deferred terms. The return is profit from a real sale rather than interest on a loan.
Commodity murabahah
A murabahah applied to a commodity to generate cash: a financier buys a permissible commodity and sells it to the customer at a disclosed cost-plus price on deferred terms; the customer sells it on for spot value, receiving cash today against a fixed amount to repay. This is the structure most often used for a Shariah-compliant stock loan.
Tawarruq
The cash-raising application of commodity murabahah: the customer's aim is liquidity, not the commodity, so the commodity is sold on for cash. In Malaysia the term is used interchangeably with commodity murabahah for this purpose.
Wa'd
A unilateral promise or undertaking by one party to do something in the future. Wa'd is used in some Islamic finance structures to sequence the steps of a transaction while keeping each contract distinct.
Profit rate
The return in a Shariah-compliant facility, expressed as profit arising from a permissible sale-based arrangement rather than as interest on a loan. It is fixed and known at the outset instead of accruing as a time-value charge on money advanced.
The eligibility framework
Shariah-compliant securities
Listed securities classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission Malaysia, which publishes a periodically updated list. A Shariah-compliant financing presupposes a Shariah-compliant underlying counter.
Shariah Advisory Council (SAC)
The authority established under the Securities Commission Malaysia on Shariah matters in the capital market. It sets the classification methodology, publishes the list of Shariah-compliant securities, and issues resolutions that inform accepted market practice. See our
note on the SAC.
Shariah screening
The two-tier process by which the SAC classifies a listed company: a business-activity screen that excludes prohibited activities, and financial-ratio benchmarks that limit incidental non-compliant elements. Passing both places the counter on the list.
Shariah adviser
A qualified specialist who reviews whether a specific structure and its documentation are Shariah-compliant. Compliance is a matter for such advisers, not something a financing arranger asserts on its own.
These are plain-English working definitions to support a financing conversation, not formal Shariah definitions or Shariah, legal, or tax advice. Whether a particular counter or structure is Shariah-compliant is confirmed against the current list of Shariah-compliant securities and with qualified Shariah advisers and your own Malaysian counsel as part of each transaction.