ijara

ijara(h) is similar to a conventional finance lease. The financial institution leases an asset to a lessee in return for agreed rental payment. The terms of ijara leases differ from those found in a conventional finance lease because, in order to comply with Sharia, the financial institution takes on some of the commercial risks (such as damage to or loss of the asset) more usually associated with operating leases. Typically, the ijara will be proceeded by a transaction which gives the financier title to the asset, such as a sale or istisna'a.

+ ijara

Also known as ijarah.

International, USA

An Islamic finance technique used to finance the acquisition of assets on terms compliant with Sharia. In an ijara transaction, the financing party purchases property, equipment or other asset desired by its client and then leases it to the client for a rental fee (calculated by reference to a benchmark such as LIBOR). Some ijara transactions (ijara wa-iktina'a) give the client the right (but not the obligation) to purchase the asset at or before the end of the lease term.

Related links

istisna'a (construction or manufacturing financing)

Sharia

Islamic finance: <