Ijarah - Leasing

 Essentials of Ijarah contract  General juristic rules of Ijarah (Execution, rent determination, sub-lease, security, liabilities, termination, failure in payment etc.)  Modern use of Ijarah  Islamic banks’ Ijarah Muntahia – bi – Tamleek

Islamic Finance, Dr. Waheed Akhter, COMSATS, Lahore

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food. Lahore 2 .g. candles.  Monetary items (dirhmas. rent Known usufruct is transferred Ijarah vs.Essentials of Ijarah contract Lessor vs lessee – asset vs. Waheed Akhter. Bai’ (sale) – ownership right Consumables items r sold not leased e.) cannot b leased     Islamic Finance. fuel etc. COMSATS. Dr. bullions etc. dinnar. cotton.

Lahore 3 . COMSATS.General rules of Ijarah     Contracted usufruct has to b ascertained Lease period must b specified Possible benefiting from the hired asset Execution of ijarah contract – before or after possession of asset by lessor  Determination of rent – set in different phases.a. Waheed Akhter. or increase @ 5% p. Dr. or tie up to inflation Islamic Finance.

General rules of Ijarah (contd. Lahore 4 . Waheed Akhter. Hanbli)  Sub-lessor cannot keep surplus (Abu Hanifa)  Contemporary scholars also prefer first one Islamic Finance.)  Sub-lease by lessee – subject to the consent of lessor  If sub-lease ≤ actual rent payable  Unanimous opinion  If sub-lease > actual rent payable  Sub-lessor can enjoy surplus (Shafi’. Dr. COMSATS.

COMSATS. Waheed Akhter. Bills. natural loss etc.General rules of Ijarah (contd.  Lessee – responsible for water tax.)  Security or guarantee in ijarah  Liabilities to the parties  Lessor – responsible for tax. Lahore 5 .  Termination of the contract – by mutual consent. expenses related to use of house etc. elect. Dr. remaining rent not allowed  Failure in payment of due rent Islamic Finance.

enters into an MOU with some earnest money  Bank appoint client as its agent who open an L/C or A/C on behalf or wid bank  Bank & client may jointly purchase the asset & bank leases it on dim.Tamleek  Client convey his request to bank. Waheed Akhter. Lahore 6 . Musharka  Formal lease agreement after ownership by bank  Bank may charge penalty on client willful default  Sale and lease back arrangement  Destruction / Theft of the asset Islamic Finance.Procedure for Ijarah Muntahia – bi. Dr. COMSATS.

Dr. Waheed Akhter. Lahore 7 .Issues concerning modern use of Ijarah       Burdon of asset on lessor or lessee No rental before deilvery Damage to asset during client as agent Rent reduction due to value depreciation Problem in case of default in payment Gen. perception of fixed return to bank  Risk cannot b separated from ownership  Lease & sale r two different contracts Islamic Finance. COMSATS.