Knowledge

Ijarah

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sure that the purchase contract allows Bank to step into the transaction as the buyer. The Bank then buys the property. At the closing, the Bank enters into an agreement to sell the property to you for a fixed price-the purchase price the Bank paid plus any transaction costs not paid by you at the closing. Ownership of the property is transferred to you after this price has been paid to the Bank. A payment schedule is established so that in exchange for keeping the property rented, your payments are deferred over time.
46: 1162:— although "the principles of ijarah are so numerous that a separate volume is required for their full discussion". Some of the rules include agreeing on the cost of the lease and the period of time for which it will last; clear terms in the contract; agreeing on purpose the lessee will use the property for, which they must stick to; the 1481: 1142:, or "rent and acquisition") and usually refers to a leasing contract of property (such as land, plant, office automation, a motor vehicle), which is leased to a client for stream of rental and purchase payments, ending with a transfer of ownership to the lessee, and otherwise follows Islamic regulations. 1397:
throughout the lease period" compared to financial leases used by conventional finance. Another problem is that the ijarah customer may be "exposed to the risk of losing the property if the financier is sued, loses, and declares bankruptcy" even if the customer has paid off 90% of the property price. A
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lessor/lender can evict the borrower/buyer who is "a few months in arrears" because the borrower is a tenant not an owner. In contrast the conventional borrower/buyer/mortgagor cannot because they have "security of tenure". Secondly if the Lender/mortgagee in a conventional mortgage does foreclose on
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An ijarah transaction involves two components: a purchase agreement and a lease. You go out and find the property you would like us to purchase on your behalf. You negotiate the price and other aspects of the purchase. You make any initial payment of earnest money to reserve the property. You make
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According to M.T. Usmani, "some requirements of Shari‘ah are often overlooked" in transactions of ijarah in the real world, as when an unforeseeable circumstance leads to the destruction of the asset but the lessee is required to keep paying the rent in violation of the principle that the lessor
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Other challenges are not of failure to follow sharia law properly in practice but of disadvantages in cost or consumer protection ijarah has compared to conventional finance. Mahmud el-Gamal notes the added expense of the bank/financer having to "maintain substantial ownership of the property
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The buyer's installment payments will remain the same (or fairly close to the same) through the contract, but the portion of the payment going towards ownership of the property will increase to 100% over time as the portion going to pay rent/lease decreases to 0% — the decrease in rent/lease
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Suppose, for example, a person takes a five-year interest-bearing loan to buy a car. After two years, if he finds that keeping the car and the loan is uneconomical, he can sell the car in the market and repay the loan. This is not so in the case of ijara. Ijara finance cannot be terminated
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contract for construction of whatever it is that will provide the service or benefit. The financer finances its making, while the party begins leasing the asset after "taking delivery" of it. While forward sales normally do not comply with sharia, it is allowed using
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In this transaction (hire purchase or Lease-Sale or Financial Lease) the customer leases (hires) a good and agrees to purchase it, paying in installments so that by the end of the lease it owns the good free and clear. This involves two contracts:
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provided rent/lease payment do not begin until after the customer takes delivery. Also required by sharia is that the asset be clearly specified, its rental rate be clearly set (although the rate may float based on the agreement of both parties).
1922: 1166:(owner of the leased property) agreeing to bear all the "liabilities emerging from the ownership", etc. Usmani lists eleven "basic differences between the contemporary financial leasing" and "leasing allowed by the Shari‘ah". 1238:
reflecting the decrease in the bank's equity of the property as the buyer's increases (much like the interest portion of a conventional mortgage payment declines to zero and the equity payment increases to 100% over time).
1363:), the service or benefit being leased is well-defined, but the particular unit providing that service or benefit is not identified. Thus, if a unit providing the service or benefit is destroyed, the contract is not void. 1251:) concurrent and interrelated legal contracts, the net effect being the paying of a fee for the use of money for the term of the loan. The use of concurrent interrelated contracts is also prohibited under Shariah Law.) 2040: 1247:, a technique used by European bankers and merchants during the Middle Ages to comply with the letter of the Church's prohibition on interest bearing loans. In a contractum, two parties would enter into three ( 1421:
the buyer and re-sell the property, they are "obliged by law to secure the best possible price" and to make available, "a full account" of the resale transactions to the foreclosed borrower. In a
2134: 2259: 1807: 2059: 2424: 1324:(gift), where legal title is transferred to the lessee without any more payments, and which according to investment-and-finance.net "is widely used by Islamic banks." 2282: 2354: 1254:
As of around 2013 there were 15 banks in Malaysia that offered this mode of finance (sometimes abbreviated as AITAB) for "individual and corporate customers".
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c) where ownership is transferred before the end of the lease tenor for a price equivalent to the remaining ijarah installments (net of rental).
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contract the transfer of ownership occurs as soon as the lessee pays the purchase price of the asset — anytime during the leasing period.
2517: 1089:, al-Ijārah, "to give something on rent" or "providing services and goods temporarily for a wage" (a noun, not a verb)), is a term of 2617: 2470: 1643: 1338:
a) where there is a gradual transfer of legal title of the leased property during the leasing "tenor" (period of time of the lease).
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to hold title to the property and "serve as parties to various agreements regarding obligations for repairs and insurance".
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Muhammad Akram Khan criticizes ijara's customer protection vis-à-vis conventional interest-bearing loans in an example:
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lists seventeen "Basic Rules of Leasing" (leasing referring to Islamic leasing which Usmani uses interchangeably with
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is the leasing of something (such as a home, office, or factory) not yet produced or constructed. This means the
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The lease and the transfer of ownership of the asset or the property should be recorded in separate documents.
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The agreement to transfer of ownership should not be a pre-condition to the signing of the leasing contract.
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The “promise” to transfer the ownership should be unilateral and should be binding only on the lessor.
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house purchase is in a weaker legal position than the payer of a conventional mortgage. Firstly, the
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Islamic Banking in Pakistan: Shariah-Compliant Finance and the Quest to Make Pakistan More Islamic
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Faleel Jamaldeen lists three features of ijarah that distinguish it from conventional leasing:
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b) where the legal title is transferred at the end of lease tenor for "a token consideration".
2730: 2450: 2078: 1107:” of a property, generally for a fixed period and price. In hiring, the employer is called 2694: 2319:. Kuwait: Regional Workshop on Islamic Banking. International Monetary Fund. Archived from 1151: 1103:, it means a contract for the hiring of persons or renting/leasing of the services or the “ 945: 1651: 8: 540: 489: 1359:
Islamic contract, (literally "lease described with responsibility", also transliterated
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What Is Wrong with Islamic Economics?: Analysing the Present State and Future Agenda
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The Riba-Interest Equation and Islam: Re-examination of the Traditional Arguments
1808:"What is the Difference Between Ijara Muntahia Bittamleek and Ijara Thumma Bay'?" 1120: 1082: 1039: 589: 368: 347: 1937: 1782: 1957:
Theory and Practice of Modern Islamic Finance: The Case Analysis from Australia
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Theory and Practice of Modern Islamic Finance: The Case Analysis from Australia
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assumes the liability for his ownership and offers any usufruct to the lessee.
361: 192: 2455: 2783: 2572: 2260:"Development of Sukuk: Pragmatic and Idealist Approaches to Sukuk Structures" 1593: 1299:
An Islamically correct ijara wa iqtina contract "rests" on three conditions:
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The Historic Judgment on Interest Delivered in the Supreme Court of Pakistan
2699: 1273:, it may involve both a lease contract and a sale contract. However, in an 678: 669: 646: 598: 475: 354: 296: 1224:
that triggers a sale to be completed by the end of the term of the Ijarah.
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contract the lessor/lender has "no such obligation" to the lessee.
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that outlines the terms for leasing or renting over a fixed period;
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must own the asset being leased for the entire period of the lease.
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Use of the asset being leased must be specified in the contract.
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Karim, Nimrah; Tarazi, Michael; Reilli., Zavier (August 2008).
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sale/ownership transfer is "an option given to the lessee". In
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One Islamic Bank (Devon Bank) describes the process as follows
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Heaven's Bankers: Inside the Hidden World of Islamic Finance
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need not lead to purchase. In conventional leasing an "
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Islam and Mammon: The Economic Predicaments of Islamism
2290:. Thomson Reuters & Dinar Standard. Archived from 1825: 1313:
Another source (investment-and-finance.net) describes
2015: 1992:. Cheltenham, UK; Northampton, MA, USA: Edward Elgar. 1181: 2267:
Journal of International Banking Law and Regulation
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Islamic Finance : Law, Economics, and Practice
1556: 1554: 1265:(literally, "lease and ownership") is also called 2284:State of the Global Islamic Economy Report 2015/16 1933: 1931: 1258:Ijarah wa-iqtina (or al-ijarah muntahia bitamleek) 1923:Usmani, ''Introduction to Islamic Finance'', 1998 2781: 2313:Main Types and Risks of Islamic Banking Products 2135:"Islamic microfinance: An emerging market niche" 1570: 1551: 1280:Another source describes the difference between 2485: 1928: 1504: 1502: 1460: 1458: 1456: 1996: 1981: 1947: 1611: 1350: 2471: 1916: 1874: 1057: 1499: 1453: 1412:that at least in that country the lessee of 1269:("lease that ends with ownership"). Like a 1241:(This type of transaction is similar to the 2148:. Consultative Group to Assist the Poor: 1. 1180:No compound interest may be charged if the 2478: 2464: 2386:: CS1 maint: location missing publisher ( 1718: 1064: 1050: 2429:. Edinburgh: Edinburgh University Press. 1865: 1527: 1525: 1523: 1521: 1474: 2398:Islamic Finance: Principles and Practice 1990:Islamic Finance: Principles and practice 1672: 1160:Islamic Finance: Principles and Practice 2800:Islamic banking and finance terminology 2339:Usmani, Muhammad Taqi (December 1999). 2022:Farooq, Mohammad Omar (November 2005). 1890: 1859: 1800: 1623:Ijara Community Development Corporation 1095:(Islamic jurisprudence) and product in 2782: 1987: 1518: 2459: 2426:Islamic finance in the global economy 2401:(Second ed.). Elgar Publishing. 2005:What Is Wrong with Islamic Economics? 1960:. Universal-Publishers. p. 210. 1953: 1777: 1775: 1773: 1771: 1743: 1666: 1204:Ijarah thumma al bai' (hire purchase) 1331:through sales may be of three types: 2769:Organisation of Islamic Cooperation 2156:Jihad: The Trail of Political Islam 1701:"Definition of "Ijarah wa-iqtina "" 1086: 13: 2451:Ijara as an Islamic Finance Method 2356:An Introduction to Islamic Finance 2348:. Karachi, Pakistan: albalagh.net. 2310:Turk, Rima A. (27–30 April 2014). 2309: 2016:Books, documents, journal articles 1768: 1191: 14: 2821: 2444: 2038: 1636: 1531: 1366:In contemporary Islamic finance, 2281: 2229: 2021: 1755:ijara community development corp 44: 2338: 2201: 2152: 2002: 1866:Delorenzo, Yusuf Talal (n.d.). 1693: 1579:Introduction to Islamic Finance 1563:Introduction to Islamic Finance 1467:Introduction to Islamic Finance 1408:Abu Umar Faruq Ahmad writes in 1111:, while the employee is called 573:(unlawful warfare and banditry) 16:Term of Fiqh in Islamic banking 2353:Usmani, Muhammad Taqi (1998). 2352: 2258:Saeed, A.; Salah, O. (2014) . 2257: 2236:. Princeton University Press. 2173: 2104: 1954:Ahmad, Abu Umar Faruq (2010). 1898:"Ijarah Mawsufa Fi al-Dhimmah" 1880: 1870:. Thomson Reuters. p. 59. 1586: 1576: 1560: 1508: 1464: 1296:sale is part of the contract. 1184:delays or defaults on payment. 1: 2422: 2394: 2202:Khan, Muhammad Akram (2013). 2132: 2076: 2039:el-Gamal, Mahmoud A. (2006). 1437: 1387: 2755:The Economic System In Islam 2690:Mohammad Najatuallah Siddiqi 2362:. Kazakhstan. Archived from 2159:. Harvard University Press. 2083:. Little, Brown Book Group. 1447: 1374:contract is combined with a 1267:al ijarah muntahia bitamleek 7: 2790:Islamic financial contracts 2487:Islamic banking and finance 2208:. Edward Elgar Publishing. 2174:Khan, Feisal (2015-12-22). 2108:Islamic Finance For Dummies 2048:. New York, NY: Cambridge. 1883:Islamic Finance For Dummies 1751:"Ijara Muntahia-bi-tamleek" 1511:Islamic Finance For Dummies 1372:ijara mawsoofa bi al dhimma 1368:ijara mawsoofa bi al dhimma 1357:ijara mawsoofa bi al dhimma 1351:ijara mawsoofa bi al dhimma 1196:There are several types of 1097:Islamic banking and finance 10: 2826: 2105:Jamaldeen, Faleel (2012). 1868:A Guide to Islamic Finance 1783:"What is Ijara wa Iqtina?" 1675:"Al-Ijarah Thumma al-Bay'" 1482:"Islamic Glossary. Ijarah" 1361:ijara mawsufa bi al thimma 1329:Ijarah muntahia bittamleek 1315:Ijarah muntahia bittamleek 2764: 2739: 2718: 2677: 2636: 2493: 2111:. John Wiley & Sons. 1355:In a "forward ijarah" or 1290:ijara muntahia bittamleek 1282:ijara muntahia bittamleek 1150:Islamic finance theorist 2423:Warde, Ibrahim (2010) . 1812:Investment & Finance 1442: 1403:Special-purpose entities 1145: 1129:al-ijarah (tashghiliyah) 594:("spreading corruption") 2726:Banks in the Arab world 1673:Azizi, Mohd (c. 2013). 1594:"Ijarah thumma al bai'" 1138:does lead to purchase ( 2767:The bloc known as the 2153:Kepel, Gilles (2002). 2077:Irfan, Harris (2015). 1902:investment&finance 1846:Investment and Finance 1435: 1235: 2731:Participation banking 2395:Visser, Hans (2013). 2230:Kuran, Timur (2004). 1988:Visser, Hans (2009). 1430: 1230: 32:Islamic jurisprudence 2695:Muhammad Taqi Usmani 1152:Muhammad Taqi Usmani 1134:In Islamic finance, 1730:Islamic-finance.com 1534:"MEANING OF IJARAH" 2593:Sharia investments 2588:Securities trading 2513:Bai' Bithaman Ajil 1904:. 12 February 2013 1327:or through sales. 1244:contractum trinius 685:Gender segregation 248:Islamic leadership 2777: 2776: 2685:Abdul Azim Islahi 2669:Modern gold dinar 1842:"Types of Ijarah" 1654:on 2 October 2017 1619:"Ijara Contracts" 1317:as being though 1294:ijara thumma bay` 1286:ijara thumma bay` 1271:ijara thumma bay` 1099:. 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Routledge. 2179: 2178: 2172: 2168: 2166:9780674010901 2162: 2158: 2157: 2151: 2147: 2143: 2136: 2131: 2120: 2118:9781118233900 2114: 2110: 2109: 2103: 2092: 2090:9781472105066 2086: 2082: 2081: 2075: 2065:on 2018-04-03 2061: 2057: 2055:9780521864145 2051: 2044: 2043: 2037: 2033: 2029: 2025: 2020: 2019: 2008: 2006: 1999: 1991: 1984: 1969: 1967:9781599425177 1963: 1959: 1958: 1950: 1943: 1941: 1934: 1932: 1924: 1919: 1903: 1899: 1893: 1886: 1884: 1877: 1869: 1862: 1847: 1843: 1837: 1835: 1833: 1831: 1829: 1813: 1809: 1803: 1788: 1784: 1778: 1776: 1774: 1772: 1756: 1752: 1746: 1731: 1727: 1721: 1706: 1702: 1696: 1680: 1676: 1669: 1653: 1649: 1645: 1639: 1624: 1620: 1614: 1599: 1595: 1589: 1582: 1580: 1573: 1566: 1564: 1557: 1555: 1539: 1535: 1532:Fatma, Asma. 1528: 1526: 1524: 1522: 1514: 1512: 1505: 1503: 1487: 1483: 1477: 1470: 1468: 1461: 1459: 1457: 1452: 1434: 1433:prematurely. 1429: 1426: 1424: 1419: 1415: 1411: 1406: 1404: 1400: 1394: 1385: 1382: 1377: 1373: 1369: 1364: 1362: 1358: 1343: 1340: 1337: 1336: 1335: 1334: 1330: 1326: 1323: 1320: 1319: 1318: 1316: 1308: 1305: 1302: 1301: 1300: 1297: 1295: 1291: 1287: 1283: 1278: 1276: 1272: 1268: 1264: 1255: 1252: 1250: 1246: 1245: 1239: 1234: 1229: 1223: 1219: 1216: 1212: 1211: 1210: 1201: 1199: 1186: 1183: 1179: 1176: 1172: 1171: 1170: 1167: 1165: 1161: 1157: 1153: 1143: 1141: 1137: 1132: 1130: 1126: 1122: 1118: 1114: 1110: 1106: 1102: 1098: 1094: 1093: 1084: 1080: 1079: 1067: 1062: 1060: 1055: 1053: 1048: 1047: 1045: 1044: 1041: 1038: 1037: 1030: 1027: 1025: 1021: 1017: 1015: 1014: 1010: 1008: 1007: 1003: 1002: 999: 994: 993: 981: 980: 974: 973: 969: 966: 964: 961: 959: 958: 954: 953: 951: 950: 947: 944: 943: 937: 936: 932: 930: 929: 925: 923: 922: 918: 916: 915: 911: 909: 908: 904: 902: 901: 897: 895: 894: 890: 888: 887: 883: 881: 880: 876: 874: 871: 869: 866: 865: 863: 862: 857: 852: 851: 842: 839: 838: 832: 831: 827: 825: 824: 820: 818: 817: 813: 811: 810: 806: 805: 803: 802: 799: 796: 795: 790: 789: 785: 784: 779: 778: 773: 772: 768: 766: 765: 761: 759: 758: 754: 752: 751: 747: 746: 744: 743: 740: 739: 735: 734: 731: 728: 727: 722: 717: 716: 708: 705: 703: 700: 698: 697: 693: 690: 686: 683: 681: 680: 676: 675: 671: 666: 665: 654: 649: 645: 643: 641:(retaliation) 638: 634: 632: 627: 623: 622: 621: 620: 615: 610: 606: 600: 597: 591: 588: 586: 581: 577: 575: 570: 566: 564: 562:(illicit sex) 559: 555: 553: 548: 544: 542: 539: 537: 536: 532: 531: 530: 529: 524: 519: 518: 506: 505: 501: 499: 498: 494: 492: 491: 487: 485: 484: 480: 478: 477: 473: 471: 470: 466: 464: 463: 459: 457: 456: 452: 451: 449: 448: 445: 442: 441: 432: 431:Breastfeeding 429: 427: 424: 423: 419: 418: 414: 412: 411: 407: 403: 402: 398: 396: 395: 391: 390: 389: 386: 384: 381: 380: 378: 377: 371: 370: 366: 364: 363: 359: 357: 356: 352: 350: 349: 345: 344: 339: 338: 334: 332: 329: 328: 326: 325: 322: 319: 318: 313: 308: 307: 299: 298: 294: 292: 291: 287: 285: 284: 280: 278: 277: 273: 271: 270: 266: 264: 263: 259: 257: 254: 253: 249: 246: 245: 242: 237: 236: 223: 222: 216: 215: 211: 209: 208: 204: 201: 200: 196: 194: 190: 189: 185: 184: 182: 181: 178: 177: 173: 172: 169: 168: 164: 163: 160: 159: 155: 154: 149: 148: 144: 142: 141: 137: 130: 129: 125: 123: 122: 117: 116: 114: 113: 112:Sunnah prayer 108: 107: 103: 102: 98: 96: 95: 91: 89: 88: 84: 83: 81: 80: 77: 76: 72: 71: 68: 67: 63: 62: 57: 52: 51: 47: 43: 42: 39: 37: 30: 29: 25: 21: 20: 2753: 2746: 2700:Rusni Hassan 2537: 2518:Bai' Muajjal 2425: 2412:. 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Index

a series
Islamic jurisprudence
(fiqh)


Ritual
Shahada
Salah
Raka'ah
Qibla
Turbah
Sunnah prayer
Tarawih
Tahajjud
Witr
Nafl prayer
Sawm
Zakat
Hajj
Ihram
clothing
Mut'ah
Tawaf
Umrah
and Hajj
Political
Islamic leadership
Caliphate
Majlis-ash-Shura
Imamate
Wilayat al-faqih
Bay'ah

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