---
title: "What is Gharamah (late-payment penalty paid to charity)? | IslamicOpenFinance™"
description: "A penalty for late payment that the creditor may not keep as income and must direct to charitable purposes."
url: https://islamicopenfinance.com/glossary/gharamah/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Sale-based contracts](https://islamicopenfinance.com/glossary/#sales)

Sale-based contracts

# Gharamah (late-payment penalty paid to charity)

A penalty for late payment that the creditor may not keep as income and must direct to charitable purposes.

Gharamah is a penalty imposed on a debtor for late payment, on the understanding that the creditor does not keep it as income. Bank Negara Malaysia's Shariah Advisory Council allows late payment charges built on a combination of gharamah and ta'widh, with the portion above actual loss channelled to charity. AAOIFI's standard on the procrastinating debtor allows a contract to include the debtor's undertaking to donate an amount to charity through the institution if it delays. In both cases the amounts must be tracked separately from income and their charitable use evidenced.

## Sources

- [Bank Negara Malaysia, Shariah Resolutions in Islamic Finance, second edition, 2010: resolutions on late payment charges combining gharamah and ta\`widh](https://www.bnm.gov.my/documents/20124/9198675/shariah_resolutions_2nd_edition_EN.pdf)

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

## Related terms

[**Ta'widh (compensation for actual loss)** Compensation for the actual loss a creditor suffers from late payment, accepted by some authorities and rejected by others.](https://islamicopenfinance.com/glossary/tawidh/) [**Purification of income** Giving away, usually to charity, income from a non-compliant source or a Shariah breach, so the institution does not benefit.](https://islamicopenfinance.com/glossary/purification/) [**Sadaqah** Voluntary charity given to people in need, beyond the obligatory zakat.](https://islamicopenfinance.com/glossary/sadaqah/) [**Murabaha** A sale at cost plus an agreed, disclosed profit; the seller must own the asset first. Payment is often deferred in instalments.](https://islamicopenfinance.com/glossary/murabaha/)

**Sale-based contracts**

1. [Murabaha](https://islamicopenfinance.com/glossary/murabaha/)
2. [Musawamah](https://islamicopenfinance.com/glossary/musawamah/)
3. [Bay al-muajjal (deferred-payment sale)](https://islamicopenfinance.com/glossary/bay-muajjal/)
4. [Salam](https://islamicopenfinance.com/glossary/salam/)
5. [Istisna](https://islamicopenfinance.com/glossary/istisna/)
6. [Tawarruq](https://islamicopenfinance.com/glossary/tawarruq/)
7. [Bay al-sarf (currency exchange)](https://islamicopenfinance.com/glossary/bay-al-sarf/)
8. [Murabaha to the purchase orderer](https://islamicopenfinance.com/glossary/murabaha-purchase-orderer/)

[All 221 terms](https://islamicopenfinance.com/glossary/)