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IJARAH CONTRACT

In the traditional Ijarah agreement, the customer doesn’t have the finances to acquire as an asset, he can approach the bank to acquire as an asset and pay the rental as per agreed terms of the contract.t is a form of asset finance which has the benefit of using assets without the requirements of ownership. The lessee acquires the asset he needs without borrowing on interest and receives the benefits of use while the lessor receives the value of regular rental payments for a specified period plus the residual value of the asset

IJARAH CONTRACT DETAILS

Small, medium and large-scale businesses can benefit from lease assets without having to buy it. The contract is also suitable for those business owners who can’t buy expensive equipment, and whose resale value is poor, for example, information technology machinery. It is one of the most simple and transparent financial instruments because the client has the promise from the bank that the asset will be gifted at the end of the lease period.

IJARAH PROCESS

01

REQUESTING ASSET FINANCE

The lessee (customer) approaches the bank to purchase an asset and lease that asset for a particular period of time.

02

USE OF ASSET

The ownership remain with the bank, but the customer can use the asset and pay the rental to the financial institution.
03

TRANSFER OF OWNERSHIP

When the entire rentals are paid and the lessee pays the purchase price of the asset, with a promise, the lessor (bank) will transfer the ownership title to the lessee.

HOW IJARAH CONTRACT CAN HELP YOU

KEY BENEFITS OF A IJARAH CONTRACT

EASY ACCESS TO ASSET

Small, medium and large scale businesses can benefit from lease assets without having to buy it.

NON EXPENSIVE SOLUTION

The contract is also suitable for those business owners who can’t buy expensive equipment, and whose resale value is poor, for example, mining machinery, agriculture machinery

SIMPLE AND TRANSPARENT

It is one of the most simple and transparent financial instruments because the client has the promise from the bank that the asset will be gifted at the end of the lease period.

Expert Advice

The above information provides beneficial knowledge about Islamic Finance solutions. The content is provided for information purposes only. For more details, please reach out to one of our Expert Today.

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