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Discussion on the topic of Ijarah mechanism

islami Bank Bangladesh Limited

Discussion on the topic of Ijarah

Md. Israfil Hossain
Principal Officer
IAD, Head Office
Definition of Ijarah: The term 'Ijarah' is an Arabic word which is derived from the word
'Ajr' or 'Ujrat'. Ajr or Ujrat means consideration, return, remuneration, wages or rent. Thus the
lexical meaning of Ijarah is to give something on rent. This means leasing , hiring or renting.
Actually Ijarah is a kind of sale in which only services are bought and sold, while in other kinds
of sale goods, assets, properties and moneys are sold and bought.
Sale Vs Ijarah~~~~~~~~~~~~ Ariyah Vs Ijarah
Shariah base of Ijarah: The Fuqaha (jurists) have considered Ijarah contract as a part of sale
transactions in its broad sense. They have established that Ijarah is a specific kind of sale
transaction and they are in complete consensus of the permissibility of Ijarah according to the
following texts of the Quran and the Sunnah.
“Then if they give a suck to the children for you give them their payment and let each of you
accept the advice of the other in a just way”(6.65). In another place the Quran clearly mentions
the contract mutually agreed upon by Musa (as) and Yakub (as) “And said one of them (the two
women) O' my father! Hire him (Musa) verily a best men for you to hire is the strong, the
trustworthy” (26:28). He (the father) said, I intend to wed one of these two daughters of mine to
you on condition that you serve me for eight years, but if you complete (it in) ten years it will be
(a favor) from you”(27:28).
The Prophet (swa) also said, “Give the hired (men) his due before his sweat to dry up.” Thus
Ijarah is permitted on the basis of the Quran, Sunnah and Ijma of the Ummah.
Component of Ijrah: The elements or components of Ijarah found from the above discussion
may be enumerated as follows:
1. The contract: This includes Ijab (offer) and Kabul (acceptance).
2. The contracting parties: An Ijarah contract must have two parties: the lessor/hiree
(Ajir/Muajir) and the lessee/hirer (Mustajir).
3. The object: It means the non-fungible goods/assets/properties/a person or an animal, the
possession of which is handed over to the lessee/hirer to facilitate him to derive or extract
the utility/benefit/service from the same.

II. Rules regarding the object 4. which is called . Rules regarding contract 2. Rules regarding insurance of the asset 10. 5. It includes hiring of any person to perform a specific job and hiring of an animal for specific use. These are bought and sold and are counter values for each other. Rules regarding the residual value of the leased asset 12. machines and tools etc. Terms & conditions of affecting Ijarah: As a normal sale transaction the lease /Ijarah contract is governed by all the rules of sale and by certain terms and conditions specially prescribed for Ijarah. For example. the owner of the car will take the hirer from Dhaka to Chittagong and mentioning of duration is not required here. i.. Rules regarding expenses consequent to the ownership 8. The subject matters of the contract: This includes the utility/benefit/service extracted from the object. The terms and conditions of affecting Ijarah are as follows: 1. In such a case the employee or labourer has to perform that work in whatever time it may take. human beings and animals. Rules regarding sub-lease Classification of Ijarah: Primarily Ijarah may be classified into Ijarah al Dimmah and Ijarah al-Ain. Rules regarding rentals 6. Ijarah al-Dimmah: Ijarah al-Dimmah is related with the buying and selling of services of living beings. 5. Rules regarding contracting parties 3. I. Rules regarding termination of the lease 11. houses. Rules regarding benefit. In that case.4. Ijarah al-Ain: The second type of Ijarah is related with the buying and selling of services or usufruct of non-fungible goods like assets and properties. Rules regarding penalty 9. Sometimes a lease contract may be for a particular piece of work and the mentioning of the period is not needed there. Here the Ijarah means to transfer the services or usufructs of a particular nonfungible goods to another person in exchange for an agreed upon price. and the wages/rent/remuneration paid in exchange for utility/benefit/service. Period of contract: This means the duration of the contract.e. land. a person may hire a car for going to Chittagong from Dhaka. Rules regarding lease period 7.

Ijarah al-Musha: When a group of person hires a property or asset. wages or rent (Ajr) is the price of an advantage or service or utilities. Ijarah al-Fard: When only one person hires a property or asset. such as that which is contracted for a purpose that does not have legal sanction. It is a condition that rent should be known. or an incongruous condition. void-batil. the person or organization who takes the property/asset on lease is called Lessee/Hirer or Second. The place where the rent to be paid: According to the usage of the term. such as the absence of sufficient clarity. it is known as Ijarh al-Fard. At the end of the lease period the asset reverts to the lessor. such as carrion or blood. A valid ijarah contract is that which is legal in both its fundamental and ancillary components. Here the individual or organization who leases/hires/rents out the property/asset is called the Lessor/Hiree or Ajir/Muajir. the price/consideration agreed upon and paid is called rent or Ajr/Ujrat. Defective & Void Ijarah: An Ijarah contract may be either valid. identifiable and specifiable and be fixed at the time of contract for the whole period of lease. A defective ijarah contract is that which is fundamentally. ii) Operating Lease: Operating lease differs from financial lease in two primary respects: First. Again Ijarah or leasing related with the services of non-fungible goods may be of two types : (i) the financial lease and (ii) the operating lease. The lessor retains the ownership of the asset but the lessee is given the exclusive right to the use of the asset on payment of specific rentals. per . such as a contract to make statues. Ijarah may again be divided into (i) Ijarah al-Fard and (ii) Ijarah al-Musha. In this sense the term Ijarah is nearer to the English terms leasing. an operating lease is cancellable and is generally executed for a shorter period than is a financial lease. assessable. and the service which is bought and sold is called the benefit or maajur. the Ijarah is called Ijarah alMusha. or defective-fasid. in an operating lease the lessor remains responsible virtually for all expenses relating to the ownership of the asset. per day. A void ijarah contract is that which is illegal in its fundamental and ancillary characteristics. i) Financial Lease: A financial lease involves a non-cancellable agreement between the lessor and lessee for lease of a specific asset to the lessee for a long or an intermediate term. Rent may be fixed on the basis of uit of time such as rent per hour. or that is in return for an unlawful consideration. legally sound but that has a forbidden characteristic. hiring or renting.sahih.

machinery. So. is a debt payable by the lessee. Compensation of the lease property: No penalty or additional charge for delay in payment of rent is allowed in Shariah. Any additional charge on this debt for late payment is exactly the riba prohibited by the holy Quran. Delivery of goods: The lessor is obliged to enable the lessee to utilize the usufruct of the contracted asset i. the lessee may be asked to undertake that. However. if he fails to pay the rent on its due date. as an alternative measure. in the Ijarah contract also the lessor and the lessee must fulfill the conditions relating to themselves. That both of them must be same. Delivery which enables usufruct entails that if any casual incident occurs and prevents usufruct of the leased without being due to the act of the lessee. real estates. should be corrected by the lessor. after it becomes due.T. but the amount so paid to the lessor shall remain with him as 'on account' payment and shall be adjusted towards the rent after its being due. must have attained the age of puberty and the age of majority and also must be fully free or independent either to consent or not to consent. computer. motor vehicles. he will pay certain amount to the charitable fund of the . If the total amount of rent paid in advance or any part of its remains unadjusted with rent and the lease contract expires.month or per year etc. by delivering the asset to him up to the end of the contract period or the distance. consumers' durable. so the parties to the contract are actually buyer and seller. Of M. Authority of the parties on the lease property after agreement : In an Ijarah contract. printing of one format of a book etc. medium and long-term financing to lease different items like equipment. like all other sale contracts.e. Paying back the lease-property: The rent or any part thereof may be payable in advance before the delivery of the leased item to the lessee. the remaining amount should be paid back to the lessee.S Rod by truck from Dhaka to Chittagong. because the rent. or it may be fixed on the basis of piece of work such as carrying 5 M. If may also be applied in providing working capital to industrial clients in the form of hiring labour by the bank and sub-lease them to the client. the contracting parties are lessor and lessee (in case of non-fungible goods). As an Ijarah contract is the same as that of sale. infrastructure project and any other suitable and acceptable item. Leasing of Commodity: This mode is being used by Islamic Banks to provide their customers with short. such as refurbishment of the residence or removal of any defect that hampers dwelling. Delivery includes accessories of the leased asset without which the intended usufruct is not possible as per the prevailing practice. or employee and employer (in case of human beings) or hiree and hirer (in case of living beings).

.institution which the institution will use for charitable purposes including interest-free loans to the needy persons.