Glossary
Sadaqah
Voluntary charity, given whenever you choose and in any amount.
صدقةṣadaqah
Sadaqah is voluntary giving, as distinct from the obligatory zakat. It is the mechanism through which tainted money is cleansed in Islamic finance, and it is where late-payment penalties end up: Bank Negara's SAC requires gharamah to be channelled to charitable bodies rather than recognised as income, DSN-MUI requires the Indonesian card's late charge to be recognised entirely as social funds, and AAOIFI permits a debtor to undertake to donate an amount to charitable causes through the institution if he procrastinates. Whether donating a penalty actually cures it is one of the open arguments recorded in debates.md.
Related terms
GharamahA fine for paying late, charged to make you pay on time rather than to cover a real loss.ZakatThe compulsory annual charity payment Muslims make on wealth they have held for a year.HibahA gift given freely, with nothing promised in return.Ta'widhCompensation for money the bank actually lost because you paid late.
Sources
- Bank Negara Malaysia, item 81; DSN-MUI Fatwa No. 54 clause Keenam (b); AAOIFI Shariah Standard No. (3) clause 2/1/8