Ijarah
A lease: the lessor owns the asset and sells its use for an agreed rent over an agreed period.
Ijarah is a contract to lease the usufruct, or use, of a specified asset for an agreed period in return for an agreed rent. The IFSB notes that it may be preceded by a binding promise from one party and that the lease itself binds both parties. Ownership stays with the lessor, and Bank Negara Malaysia's policy document places the costs that arise from ownership, such as maintenance and takaful cover, on the lessor, while allowing the parties to agree how those costs are handled.
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
Ijarah muntahia bittamleekA lease that ends with ownership passing to the lessee, through a separate sale or gift promised by the lessor.Ijarah mawsufah fi al-dhimmah (forward lease)A forward lease of an asset described by specifications, with use starting on a future date once it is delivered.Ujrah (fee)A fee, wage or rent paid for a service, an agency or the use of an asset; the price side of ijarah and paid wakalah.Sukuk al-ijarahSukuk whose holders own leased assets and receive the rent paid by the lessee as their return.Ijarah accountingHow lessors and lessees report ijarah contracts, including leases ending in ownership, under AAOIFI's ijarah standard.