default risk?The risk that a borrower
will not repay the lender, be it for criminal purposes or because of matters
out of the borrower’s hands. It can also mean the risk that a contractor will
not have its invoices paid. The default risk is one of the factors that are
taken into account when calculating an appropriate rate of interest to apply to
a borrower, or whether to grant credit for work as opposed to insisting upon
payment in advance. Default risk of an individual, organisation or nation can
be calculated by a credit
rating agency. Default risk is also called credit risk.
deferred annuity?An annuity contract which,
unlike an immediate
annuity, the annuitant
pays some time before the annuity matures, typically as monthly or annual deposits.
deferred payment?A pre-arranged debt. The debt might be paid back in total on the agreed day or could be paid
back in instalments leading up to the final payment. In advertising
terminology, the deferred payment is ‘buy now, pay later’. This often (but not
necessarily) implies zero interest, which is why it is a Shariah-compliant basis for the finance industry. Once the goods have been purchased or delivered, it is up to the debtor to make sure he or she has the funds to pay off the debt at the agreed
time. Deferred payment arrangements are beneficial to both the borrower and the
lender. For the lender (or seller), it is a useful promotional tool which can
make a customer choose it instead of a competitor who does not offer the
service, or who charges interest. Even though the money is not in the bank, it is owed, and although
there is a default risk, it could be neutralised
by increased sales. However, to counteract default risk it would be normal for
the risk to be assessed by a credit rating
agency, especially for larger purchases; alternatively, deferred payment might
only be available to customers with whom the supplier has a trusting
relationship. For the borrower (or buyer), the benefit is that it allows items
to be bought quickly, even without the money available there and then. This
could be useful for an entrepreneur if a gap in the market opens up which would
be missed by a delay.
deity?The generic name for gods, a God, or any entity
which is believed by religious people as having supernatural or superhuman
deposit?The placing of money in a bank account.