Ijarah

“Ijarah” is a term of Islamic fiqh. Lexically, it means ‘to give something on rent’. Ijarah means ‘to transfer the usufruct of a particular property to another person in exchange for a rent claimed from him.’ In this case, the term ‘Ijarah’ is analogous to the English term ‘leasing’. Here the lessor is called ‘Mujir’, the lessee is called ‘mustajir’ and the rent payable to the lessor is called ‘ujrah’.

The rules of Ijarah are very much analogous to the rules of sale, because in both cases something is transferred to another person for a valuable consideration. The only difference between Ijarah and sale is that in the latter case the ownership of the property is transferred to the purchaser, while in the case of Ijarah, the ownership of the property remains with the lessor, but only its usufruct i.e. the right to use it, is transferred to the lessee.

Business Need

1. A medium to long term Islamic leasing facility for vehicles that are used for commercial and non-commercial purposes.

2. A medium to long-term Islamic leasing facility for plant and machinery. The subject matter of Ijarah may be purchased locally or imported by the Client as an Agent of PKIC.

3. A medium to long term Islamic leasing facility for vehicles and plant and machinery where asset is purchased from the Client and leased back to him.

Essential Shariah Requirements

1. The owner of some asset must transfer its usufruct to another person for an agreed period, at an agreed consideration.

2. The subject of lease must have a valuable use (which is recognized as Mal-e-Mutaqawwam) in Shariah. Therefore, things having no usufruct at all or whose usufruct is not permissible according to Shariah cannot be leased.

3. Anything which cannot be used without consuming cannot be leased out. Therefore, the lease cannot be affected in respect of money, eatables, fuel and ammunition etc.

4. The lessee is liable to compensate the lessor for any damage to the leased asset caused by any misuse or negligence on the part of the lessee.

5. The leased asset shall remain in the risk of the lessor throughout the lease period in the sense that any harm or loss caused by the factors beyond the control of the lessee shall be borne by the lessor.

6. It is necessary for a valid lease that the leased asset is fully identified by the parties.

7. The lease period shall commence from the date on which the leased asset has been delivered to the lessee (in a useful condition), no matter whether the lessee has started using it or not.

8. The lessee cannot use the leased asset for any purpose other than the purpose specified in the lease agreement.

9. As opposed to conventional financing method, upon completion of lease period under Ijarah the lessor shall gift / sell the asset to the lessee by signing a separate Gift / sale Deed with the Client.