Purification of income
Giving away, usually to charity, income from a non-compliant source or a Shariah breach, so the institution does not benefit.
Purification is the removal of impermissible income by channelling it to charity instead of recognising it as the institution's earnings. It applies to income from Shariah non-compliant events, to the non-compliant portion of returns from screened investments, and to late payment penalties. IFSB-31 expects supervisors to look at how institutions remedy Shariah non-compliance, including the purification of income.
Sources
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
Shariah non-compliance riskThe operational risk that an institution fails to comply with Shariah rules and principles in its products and services.SadaqahVoluntary charity given to people in need, beyond the obligatory zakat.Shariah screeningChecking whether a company's business and finances meet Shariah criteria before it can be held in an Islamic fund or index.Islamic collective investment schemeAn Islamic fund: investors pool money in units of equal value, managed under Shariah rules, sharing in the fund's profit or loss.