Last updated 14 November 2026 · Reviewed by Riyadh Financial Services Compliance
At a glance
- Islamic finance avoids riba and earns its return from a real asset, a genuine sale or a partnership.
- Our Ijaar home finance has a rental rate, with Principal and Rental or Rental Only payments.
- Some terms describe things we don't offer, such as Murabaha and takaful. They're included for general education.
- For how the contracts fit together, see Islamic finance contracts explained.
What do common Islamic finance terms mean, from A to Z?
| Term | What it means |
|---|---|
| Accredited broker | A mortgage broker approved to submit applications for a particular financier. Brokers must act in your best interests under Australian credit law. |
| Al-Mustaqbal SMSF | Our finance for self-managed super funds buying commercial property. Al-Mustaqbal means "the future" in Arabic. It uses Diminishing Musharakah. |
| Bare trustee | In a limited recourse borrowing arrangement, the trustee of a holding trust that holds legal title to the property for the fund. |
| Beneficial interest | An ownership share in a property. With our Ijaar home finance, the financier holds a beneficial interest, which passes to you when all payments are made. |
| Diminishing Musharakah | A partnership in which one partner gradually buys out the other's share, while paying for the use of the share it doesn't yet own. |
| Dividend rate | The rate used on Al-Mustaqbal SMSF finance. The fund pays a dividend on the financier's remaining share. |
| Financier | The organisation that provides the finance. Riyadh Financial Services arranges finance through brokers. It isn't the financier. |
| Gharar | Excessive uncertainty in a contract, such as unclear terms or an unknown price. Islamic finance avoids it. |
| Halal | Permissible under Shariah. |
| Haram | Not permitted under Shariah. |
| Ijaar | The name of our home finance, from the Arabic word for lease. |
| Ijarah | A lease: the right to use an asset in return for rental. |
| Ijarah Muntahia Bittamleek | A lease that ends in ownership. It's the structure our Ijaar home finance uses. |
| Istisna | A contract to make or build something, often used in construction, with payment in advance, in stages or on delivery. |
| Limited recourse borrowing arrangement (LRBA) | The way super law lets a self-managed super fund borrow to buy a single asset. If things go wrong, the financier's rights are limited to that asset. Strict rules apply. |
| Maysir | Gambling or speculation, where gain depends on chance. Islamic finance avoids it. |
| Murabaha | A sale at cost plus a mark-up that's disclosed and agreed at the start, usually paid in instalments. The financier earns a profit on the sale. We don't offer Murabaha. |
| Musharakah | A partnership in which two or more parties contribute capital and share the risk and the return. |
| Principal and Dividend, Dividend Only | The payment options on Al-Mustaqbal SMSF finance. Principal and Dividend also reduces the amount financed. |
| Principal and Rental | You pay rental plus amounts that reduce the amount financed, so the financier's share gets smaller over time. |
| Registered mortgage | Security registered on the property's title. With our Ijaar home finance, the financier holds one until all payments are made, and then it's discharged. |
| Rental Only | You pay rental without reducing the amount financed. It's available for a limited period. |
| Rental rate | What our Ijaar home finance charges for the use of the financier's share of a property: a rental rate, not an interest rate. It can be variable, or fixed for a period on selected Ijaar home finance. |
| Riba | Interest, or any increase charged for lending money for money. Islam prohibits it. |
| Shariah | Islamic law, drawn from the Qur'an and the Sunnah (the teachings and practice of the Prophet Muhammad, peace be upon him). |
| Shariah adviser | A scholar who reviews a product's structure and documents against Shariah principles. |
| Shariah certificate | A written statement from a Shariah adviser about particular products. Ask which products it covers and when it was last reviewed. |
| Shariah-compliant | Structured in line with Islamic law, for example by avoiding riba, gharar and maysir. |
| Sukuk | Certificates, often called Islamic bonds, that represent a share of ownership in an asset or project. They're an investment, not property finance, and we don't offer them. |
| Takaful | Islamic insurance, based on members contributing to a shared fund that helps members who suffer a loss. We don't offer takaful: with our finance, conventional building insurance is required. |
| Wakalah | An agency agreement, where one party acts on another's behalf. |
| Wakeel | An agent. With our Ijaar home finance, the financier appoints you as its wakeel, under a Wakalah agency agreement, to buy the property on its behalf. |
Which terms describe how Ijaar home finance works?
Our Ijaar home finance uses Ijarah Muntahia Bittamleek, a lease that ends in ownership. Put together, the terms work like this:
- The financier appoints you as its agent (wakeel, under a Wakalah agency agreement) to buy the property on its behalf.
- You're the registered owner on the title from settlement. The financier holds a registered mortgage and a beneficial interest (an ownership share).
- You pay rental at a rental rate, with Principal and Rental or Rental Only payments.
- When all payments are made, the financier's ownership share passes to you.
Which terms apply to SMSF finance?
Al-Mustaqbal SMSF uses Diminishing Musharakah, structured as a limited recourse borrowing arrangement: a bare trustee holds legal title for the fund. The fund pays a dividend rate, with Principal and Dividend or Dividend Only payments. It's for commercial property purchases only. Neither Riyadh Financial Services nor brokers give SMSF advice. Speak to a licensed financial planner or an accountant licensed to give SMSF advice.
How do you use these terms when you compare finance, step by step?
- Talk to a broker about your plans. If you don't have a broker, contact us and we can refer you to an accredited broker.
- Ask which contract the product uses, such as Ijarah, Murabaha or Diminishing Musharakah.
- Ask what the rate is called and where the financier's return comes from.
- Ask for the current Shariah certificate and what it covers, and read your documents before you sign.
How can Riyadh Financial Services help?
Riyadh Financial Services arranges Shariah-compliant property finance through accredited mortgage brokers. Accredited brokers must act in your best interests under Australian credit law (the best interests duty), and they work across Australia, in person or online.
- Ijaar home finance for buying a home to live in or an investment property.
- Refinancing existing finance to Ijaar home finance.
- Al-Mustaqbal SMSF finance for self-managed super funds buying commercial property.
Our product structures are reviewed by our independent Shariah adviser. Ask us for the current Shariah certificate and what it covers. We explain how our structures work, but we don't give religious rulings, and you're always welcome to seek your own scholar's view.
Keep reading:How Islamic home finance works · Ijarah vs Murabaha · Ijaar home finance