Ijarah muntahia bittamleek
A lease that ends with ownership passing to the lessee, through a separate sale or gift promised by the lessor.
Ijarah muntahia bittamleek is a lease combined with a separate promise from the lessor that the lessee will come to own the asset at the end of the lease. Under the IFSB definition, ownership can pass by sale for a token amount, an agreed price or market value, or by gift, through a promise to sell, a promise to donate or a conditional gift contract. The transfer is a separate act from the lease, which keeps the lease and the sale from being made conditional on each other.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
IjarahA lease: the lessor owns the asset and sells its use for an agreed rent over an agreed period.Wa'd (promise)A unilateral promise to do something in the future; it can be made binding and is used in hedging, sukuk and lease-to-own deals.HibahA gift: a transfer of ownership without consideration, sometimes paid by banks at their discretion to account holders.Ijarah accountingHow lessors and lessees report ijarah contracts, including leases ending in ownership, under AAOIFI's ijarah standard.