CHAPTER 15

LEASE-BASED FINANCE MECHANISM

Ijarah Financing
Al Ijarah is called the act of transferring the use rights of a good or service within a certain time
through the payment of rent / wage, without being followed by the transfer of ownership of the
goods itself. The purpose of "benefit" is useful, that is goods that have many benefits and during
use them the goods are not changed or destroyed. Benefits taken are not in the form of its substance
but its nature and paid rent, for example, rented / rented house, car hired for travel.

The Case of the Implementation of Ijarah Financing

Because ijarah is a contract that regulates the use of tenure without any transfer of ownership,
many equate ijarah with leasing. This happens because both terms are equally referring to the
circumstances of the lease.

Ijarah Muntahia Bittamlik (Imbt)

There are several criteria in IMBT such as (1) The Customer requires the current lease of goods
for a certain period of time and wishes to own the goods at the end of the lease period, (2) The
Customer is unable to pay the rent in cash but can only pay monthly during the lease period. In
such condition, the bank may perform two contract structures: (1) Al-Bai'wal ijarah with the
promise of selling the goods at the end of the lease period, (2) Al-Bai'wal ijarah with the promise
of granting the goods at the end of the lease period.