Arbun

A down payment or earnest money in an Islamic contract. The buyer pays a non-refundable deposit to secure the right to purchase an asset at a later date. If the buyer proceeds, the deposit is applied to the purchase price.

If the buyer withdraws, the deposit is forfeited. Some scholars compare it to a call option in conventional finance, though its permissibility varies among the schools of Islamic jurisprudence.

Arbun is an earnest-money or down-payment sale: the buyer pays a portion of the price up front with the right to complete the purchase later; if the buyer walks away, the seller keeps the deposit. Classical jurists disputed it — the Hanbali school permitted it based on a report about Umar ibn al-Khattab's practice, while the majority historically disliked forfeiture clauses — but contemporary scholarship, including AAOIFI's standards, accepts Arbun with conditions: the forfeited amount must be part of the actual price (not a separate penalty), and the subject of sale must be something that can legitimately be sold.

In modern Islamic finance Arbun does double duty. In home buying, it is the closest Islamic analogue to the earnest-money deposit standard in U.S. real estate contracts, which is why halal financing providers generally have no objection to conventional earnest money held in escrow.

In investing, some structurers have used Arbun to build Shariah-compliant alternatives to call options — paying a deposit for the right to complete a share purchase — though many scholars scrutinize such uses because they can replicate the speculative payoff profile of derivatives that the prohibition on gharar (contractual uncertainty) is meant to prevent.