bay’ Literally, ‘sale’. The word appears in many Islamic financial instruments as sale and repurchase are convenient equivalents of forbidden interest-bearing transactions used in Western finance. The word also appears frequently in types of transaction that have been attempted to circumvent Islamic law but are found on closer inspection to be illegitimate.
bay’ah Oath of allegiance.
bay’at al-shajarah Literally ‘The Pledge of the Tree’ (see bay’at-ar-ridwan).
bay’at-ar-ridwan Literally ‘The Pledge of Pleasure’ (often called ‘The Pledge of the Tree’, bay’at al-shajarah). The pledge was made by the Prophet Muhammad’s companions to Muhammad himself and took place under a tree. The story goes that Muhammad and his followers were camped outside Mecca at Hudaybiyyah after they had been denied entry to the city, so Uthman ibn Affan and his envoy were sent to the city. When Uthman ibn Affan did not come back when expected, Muhammad and his followers assumed he had been murdered by the people. Muhammad asked his followers to make a pledge of allegiance to him and he pledged on behalf of the assumed-dead Uthman, too. In fact, Uthman had not been murdered, but the pledge demonstrated to the leaders of Mecca that Muhammad was determined and fearless, and he and his followers were allowed into Mecca.
bay’ ‘ajil bi-ajil Literally ‘delayed for-immediate sale’. A sales contract in which the price is paid immediately but the delivery of the item is delayed (see also bay’ al-salam).
bay’ al-kali bi-kali Literally ‘sale of a debt for a debt’; a type of contract that is prohibited in Islam. The best known is the contract in which a lender artificially extends a debt repayment period in return for an increase on the principal, which can be interpreted in no way other than being interest.
bay’atan fi bay’ Literally ‘two sales in one’. This type of sale is impossible to justify in Islam as it was explicitly prohibited by The Prophet owing to its inherent risk.
bay’ bi-thaman ajil A contract where goods are sold on a deferred payment basis. Equipment or goods are bought by the bank on the client’s behalf and are then sold to the requesting client at an agreed price with a mark-up, which becomes the bank’s profit without it being interest. The client does not have to pay back the amount immediately, which is really the object of the contract; if he or she had the capital at his or her disposal, there would be no need for the bank to act as an intermediary. The amount can be paid back in instalments or as a lump sum at the end of the duration, as in the contract.
bay’ al-mu’ajjal, bay mu’aijal A contract involving the sale of goods on a deferred payment basis. The bank buys the assets on behalf of a client and then sells the goods to the client at an agreed price, which will include a mark-up. The mark-up represents the bank’s profit and replaces the interest that would accompany a loan in a Western banking arrangement.