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A Critical Review of Car Ijarah in Pakistan:

A Case Study of Car Ijarah Offered by

Meezan Bank Limited Pakistan
In recent years the concept of Islamic banking received great attention both in area of academic
and applied research. Almost all the main banks in Pakistan offer different Islamic products
keeping in view the needs and wants of the customers. Meezan Bank is considered a leading
Islamic bank which offers a number of Islamic products to their customers (Memon, 2007). This
is a case study based research which aims to know about the Islamic guidelines for Ijarah and
analyze whether car Ijarah offered by Meezan Bank is fulfilling the set Islamic guidelines or not.
Both primary and secondary data were used for this study. Secondary data was collected from
different published articles and books while primary data was collected through structured
interviews with different levels of managers of Meezan BankCant Branch Peshawar. The
researchers discovered that the car Ijarah offered by the Meezan Bank is not fully meeting the
guidelines set by Islam because there are minor deficiencies and deviations in the process of car
Ijarah of Meezan Bank.

A Critical Review of Car Ijarah in Pakistan: A Case Study of Car Ijarah Offered by Meezan
Bank Limited Pakistan. Available from:
istan_A_Case_Study_of_Car_Ijarah_Offered_by_Meezan_Bank_Limited_Pakistan [accessed
Dec 02 2017].

Differences in accounting treatment of

Ijarah: a case study of UAE Islamic banks

Namrata Gupta (University of Wollongong, Dubai, United Arab Emirates)

Namrata Gupta, (2015) "Differences in accounting treatment of Ijarah: a case study
of UAE Islamic banks", International Journal of Islamic and Middle Eastern Finance
and Management, Vol. 8 Issue: 3, pp.369-379,

The fulltext of this document has been downloaded 987 times since 2015

This paper aims to discuss the accounting treatment of one of the most popular
instruments of financing in Islamic banks, which is Islamic leasing or Ijarah. This
research undertakes an empirical investigation of the accounting practices of Ijarah
followed by UAEs Islamic banks. The main objective of this paper is to compare the
accounting practices followed by UAE Islamic banks and accounting practices
recommended by Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI) for the accounting treatment of Ijarah.

This study also aims to examine the justification and explanation behind this
practice and clarify the accounting treatment of Ijarah as defined in the regulatory
framework and standards.

The author has found that the accounting treatment of Ijarah practiced by four
UAE Islamic banks, it is clear that all of them are following IAS-17 and not FAS-8 of
AAOIFI. The main difference is: FAS-8 issued by AAOIFI suggests that the
accounting treatment for both Ijarah and Ijarah Muntahia Bittamleek be similar to
operating lease transactions with certain exceptions. On the other hand, these
Islamic banks are accounting for Ijarah as a financing transaction, just like finance
lease in accordance with IAS-17.

Research limitations/implications
Taking out the right information from banks officials regarding Ijarah was a big

Practical implications
After considering the above-mentioned points, according to the researcher,
Western accounting standards are not appropriate to be applied in Islamic financial
institution because of their different nature and treatment of financial instruments.
Therefore, Islamic banks and other Islamic finance professionals should consider
making the standards of AAOIFI mandatory, and they should stick to these
standards for information disclosure, building investors confidence, monitoring and
surveillance. These standards would also ensure the integration of Islamic financial
markets with international markets.
Social implications
This study also aims to examine the justification and explanation behind this
practice of bankers when the researcher approached these four banks, their officials
mentioned that Ijarah contracts are similar to conventional form of financing, and it
does not involve the central tenet of Islamic capitalism, i.e. to share risk and profit;
therefore, they are justified and convinced to adopt IAS-17 in accounting for Ijarah

It is an original case study based on secondary research data.

jarah contract: a practical dilemma


Fahad Zafar (Mayfair Business Consultants, Lahore, Pakistan)

Fahad Zafar, (2012) "Ijarah contract: a practical dilemma", Journal of Islamic
Accounting and Business Research, Vol. 3 Issue: 1, pp.67-

The fulltext of this document has been downloaded 1589 times since 2012


This purpose of this paper is to highlight the weakness in vehicle Ijarah contract.

A real life example of a vehicle Ijarah contract was studied in which a customer
gets a car from an Islamic bank and then misuses the system.

The case study provides a path for more research on Ijarah contract for vehicle
leasing. Islamic bankers should take into account the amount of down payment
requested besides the fulfilment of other criteria. Vehicle Ijarah contract is only
appropriate when the amount of deposit or down payment requested is below 40 per
cent threshold, otherwise a diminishing Musharakah contract should be preferred.

Research limitations/implications
The research is only on one case reported in one of the Islamic banks in Pakistan.
The solution is also by only one Shariah scholar. The future research should be on
similar contract at entire Islamic Banking Industry. Views of all top Shariah scholars
should be taken to mitigate such kind of risks for Islamic banks.

Practical implications
This paper would trigger management of all Islamic banks to alter the structure of
their vehicle Ijarah contracts.

Social implications
Islamic bankers would be warned against making a vehicle Ijarah contract with
individuals wanting to contribute more than a down payment, just for the sake of
cheating the system.

This paper is of great importance to the management of Islamic banks as this
would raise flag against any future losses due to loopholes in the structuring of