1.

1 Definition and Concept ijarah

Ijarah in Islamic banking and finance can simply mean leasing or hiring. These
two interpretations are used interchangeably in the literature, but the focus in
this section is on the former definition. The term ijarah originates in the Arabic
verb ajara which denotes rewarding or recompensing. Literally, ijrah is
derived from the noun al-ajr which means compensation, reward, consideration,
return or counter value (al-iwad) against the use of an object. From a juristic
(fiqh) definition, ijarah refers to a contract to utilize a lawful benefit against a
consideration (Al-Zuhayli 2002). In ijarah, the right to use the object is
transferred to the hirer, not its ownership. Hence, ijarah is a sale of usufruct not
of a physical entity.