Basically Ijara is based on Partnership
Basis (which is purely HALAL). An example of car financing.
In Leasing, you have to pay a certain amount as down payment and the remaining amount is to be paid in installments. While in Ijara, bank & you purchase a car together in which bank has 80% share (investment). Now u r supposed to pay 2 type of amounts:
1-since u r the owner of only 20%, u have to acquire bank's 80% share so that u could become the owner of car. For that, you pay a certain mutually decided amount.
2-you have to pay RENT for using 80% of bank's investment. This rent will be decreasing because every month you will be acquiring bank's share & rent is paid according to bank's share.
Ijarah contract is more widely used nowadays than ever
before, primarily due to the creation of large commercial enterprises since the
dawn of the industrial revolution. As such, these terms and conditions should
be common knowledge to all Muslims.
1. The property rented or leased must be in a useable
condition (i.e., the lessee should be able to use the property for
its intended purpose). Similarly, in a hire contract, the employee must be able
to perform the job required of him or her.
2. Ijarah has
to be for inconsumable goods.
3. The lessee or the employee is not permitted to use the
subject in a manner contrary to what is permitted by the contract.
Specifically, the lessee or the employee is not allowed to inflict any harm on
the subject of the contract.
4. Ijarah contract
cannot be made for a task that is a religious obligation. For example, it is
prohibited to enter into an employment contract for leading the prayer of
making the azaan. Ijarah is valid,
however, for teaching the Qur’an or religious sciences, as well as secular
subjects because these are not religious obligations.
5. If the two parties disagree on the value of the
reimbursement or the rent/lease on the property, after the contract commences,
the word of the lessor/employer is accepted under oath upto the time of
disagreement. At that point the contract is then invalidated.
6. The majority of the scholars say that the Ijarah contract does not end by the death of one
of the two parties, as long as both parties can fulfill their end of the
contract. The Hanafis, to the contrary, deem the contract invalidated with the
death of one party.
The term Ijara literally means rent,
the Sharia process is known as Ijara-wa-Iqtina , rent
with an acquisition or rent to own. The process of Ijara can be used for
equipment as well as property. This Islamic finance process is very simple. A
single asset Trust is created
whereby the Trust purchases
the property, and then leases the property to the customer. A portion of each
monthly payment goes towards ownership, until the customer owns 100%.
When learned Ijarah contract, the
arabic term Ijarah means “providing” services and goods temporary for a wage.
The Ijara contract, involves providing products or services on a lease or
rental basis. In the Ijara contract, a person or party is given the right to
use the object (the usufruct) for a period of time, the owner retains the
ownership of the assets.
Source: dummies.com
Leasing or Ijara is also
frequently practiced by Islamic bank. Under this mode, the banks would buy the
equipment or machinery and lease it out to their clients who may opt to buy the
items eventually, in which case the monthly payments will consist of two
components, i.e , rental for the use of the equipment and installment towards
the purchase price.
Source: Islamic banking & finance, Prof.Dr Hans - Peter Burghof with Ahmad Abu - Alkheil and Ulli Spankouski
Ijarah: “to give something on
rent”
- To transfer of the ownership over the usufruct of the asset
- To employ the services of a person on wages given as a consideration for his hired services
Source: Ijarah in Islamic Banking or Islamic Leas, AIMS Lecture
A lease agreement whereby a bank
or financier buys an item for a customer and then leases it to him over a
spesific period, thus earning profits for the bank by charging rental. The duration
of the lease and the fee are set in advance. During the period of the lease,
the asset remains in the ownership of the lessor (the bank), but the lessee has
the right to use it. After the expiry of the lease agreement, this right
reverts back to the lessor.
Source: IFN, Islamic Finance News
“Ijarah” is a term of Islamic
fiqh. Lexically, it means ‘to give something on rent’. In Islamic jurisprudence,
the term ‘Ijarah’ is used for two different situatuions.
In the firts place, it means ‘to
employ the services of a person on wages given to him as a consideration for
his hired services’
The second type of Ijarah relates
to the usufructs asset and properties , ‘Ijarah’ in this sense means to
transfer the usufruct of a particular property to another person in exchange
for a rent claimed for him
source: www. kantakji.com
Differences between Ijarah dan
Convetional leasing:
Islamic financial institutuions
adopetd it by making some relevant modifications in the structure of the
leasing contract (i.e, its terms and conditions), in order to conform it to the
rules of islamic shariah
In conventional leasing, instead
of offering an interest bearing loan, banks and leasing companies provide to
the lessess an asset along with the risk of ownership..
Source: www.hibamagazine.com/Ijarah-islamic-leasing
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