Financial instruments are monetary devices that entail promises to make/receive payments between parties to a transaction. The Shari‘a views financial undertakings (mu‘amalat) as ethical commitments and therefore strictly forbids stipulating unjust contractual conditions, the most egregious of which is charging interest on a monetary loan. Adhering to this restriction, modern Islamic banks and insurance companies (Takaful) regularly substitute interest paid to a creditor with contractually enforced “gifts.” What are the conditions of possibility that enable the inscription of practices of gift-giving in debt relations? What are the similarities and differences in notions of indebtedness underlying gift exchange and the creditor-debtor relationship? What are the forms of ethical entanglement produced by reciprocal obligations of debt versus the gift? Finally, what kinds of ethical subjectivity are fashioned by regimes of exchange that perpetuate alienation and those that solidify social recognition? This paper attempts to answer these questions through a genealogy of two discursive concepts and the rules governing their practice in the Shari‘a: donation (tabarru‘) and compensation (‘iwad). In the Hanafite school of jurisprudence in South Asian Sunni Islam, gift giving was largely practiced in the form of bequests of property (wasiyya) as family endowments (waqf dhurriyya). This practice came under attack during British colonialism with the abolishment of family endowments and a reconfiguration of material relations and circulation of capital through technologies of colonial governance. Contemporary Hanafite jurists from the Deobandi tradition have resuscitated the Islamic endowment (waqf) on the model of the limited liability corporation. Ensuing practices of charitable and gift-giving in Islamic finance have thus radically altered the performativity of the donation (tabarru‘). While the Shari‘a recognized gifts and charities as unilateral and gratuitous forms of giving, Islamic banks discourage financial delinquency by contractually requiring their clients to pay “charity” in case of missed or late payments. Similarly, Islamic banks often compensate high profile clients for lower than expected returns on their investments by making payments in the form of a gift. Not only do these practices betray a bureaucratic rationalization of gift-giving, Islamic finance effectively repurposes gift-giving and its ethical function of creating bonds of social recognition into a market-based governance of financial obligations. The paper examines transformations in Islamic practices of gift-giving as guided by new forms of financial discipline. It pays specific attention to the justificatory discourses of Deobandi scholars, their internal contestations and shifting perspectives from the colonial to the contemporary era.