Understanding 9 Types of Islamic Contracts in Sharia Banking

Sharia banking offers financial solutions that not only meet transactional needs but also align with Islamic values and principles. One of the core components in Islamic finance is akad—a contract or agreement between two parties that defines the terms of a financial transaction.

According to Indonesia’s Financial Services Authority (OJK), here are the nine most common types of akad used in Sharia banking:

1. Wadiah (Safekeeping Agreement)

Wadiah is a safekeeping contract where customers entrust their money or assets to the bank, which is responsible for their security. This agreement is based on trust, and the bank is not entitled to make a profit from the deposit. The main goal is to ensure safety and integrity of the entrusted funds.

2. Mudharabah (Profit-Sharing Partnership)

Mudharabah is a business partnership contract involving two parties: the capital provider (shahibul maal) and the fund manager (mudharib). In this model, the bank usually provides the capital, while the customer manages the business. Profits are shared based on a pre-agreed ratio, while any losses are borne solely by the capital provider—unless mismanagement or violation is proven.

3. Musyarakah (Equity Partnership)

Musyarakah involves a joint venture where two or more parties contribute capital to run a business. Profits and losses are shared proportionally, based on each party’s contribution or mutual agreement. This type of contract promotes cooperation and shared responsibility in investment activities.

4. Murabahah (Cost-Plus Sale)

In a Murabahah contract, the bank purchases a product requested by the customer and then sells it back to them at a profit margin. The original purchase price and the profit are disclosed upfront. This transparent method allows customers to obtain needed goods while complying with Sharia principles.

5. Salam (Forward Sale Financing)

Salam is a type of contract used for advance purchase transactions, especially in agriculture or manufacturing. The customer pays in full at the time of the agreement, while the delivery of goods is scheduled for a future date. This helps suppliers or producers get capital upfront.

6. Istisna’ (Manufacturing Financing)

Similar to Salam, Istisna’ is used for ordering goods that are to be manufactured according to specific requirements. However, unlike Salam, both payment and delivery can be made in stages, depending on the agreement between the buyer (mustasni’) and manufacturer (sani’).

7. Ijarah (Leasing Agreement)

Ijarah refers to a lease contract where the bank rents out goods or services to a customer for a fixed period. Ownership of the asset remains with the bank, while the customer pays for the right to use it. This type of contract is often used for equipment or service-based transactions.

8. Ijarah Muntahiyah Bit Tamlik (Lease-to-Own Agreement)

This is an enhanced version of Ijarah, in which the customer has the option to own the leased asset at the end of the rental period. Commonly used for vehicle or property financing, this model combines leasing with a future transfer of ownership.

9. Qardh (Benevolent Loan)

Qardh is a non-profit loan extended by the bank to a customer. The borrower is required to repay the exact amount borrowed within an agreed timeframe. No interest or profit is taken, as the essence of this contract is mutual assistance and social responsibility.

Why Choose Bank Muamalat for Your Sharia Banking Needs?

Having a solid understanding of akad is essential for choosing financial services that align with your faith and values. As Indonesia’s first and leading Sharia bank, Bank Muamalat is committed to implementing Sharia principles in every product and service it offers.

With years of experience, strong integrity, and transparent systems, Bank Muamalat is your trusted partner for ethical, halal, and blessed financial solutions.