ijara by zubair usmani

7/22/2019 Ijara by Zubair Usmani

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THE CONCEPT OF IJARA

Dr. Muhammad Zubair Usmani

Shar ia Advisor

Muslim Commercial Bank L td.

Jamia Darul Uloom Karachi

at AlHuda CIBE NIBAF I slamabad.


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BASIC RULES OF IJARA Transferring of usufruct not ownership

To another person for an agreed price, at an agreed consideration.

Subject of lease

Valuable, I denti f ied and Quanti f ied

Consumable things cannot be leased out

Anything which cannot be used without consuming cannot be leased

out; e.g., money, wheat etc.


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All Liabilities of ownership are borne by lessor

Corpus of leased property remains in the ownership of the seller.

Period of leaseMust be determined in clear terms at the time of contract

Lease for specific purpose only

I f no specif ic purpose is identi f ied in the agreement, then it can be

used for any purpose for which it is used in normal course

BASIC RULES OF IJARA


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BASIC RULES OF IJARA Lessee as Ameen

The lessee is l iable to compensate the lessor for every harm to the

leased asset caused by any misuse or negl igence. The leased assetshal l remain in the risk of the lessor throughout the lease period.

Lease of jointly owned property

I s permitted and rentals shal l be distr ibuted between all the jointowners according to the proportion of their respective shares in

the property.


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Determination of Rental

The rental must be determined at the time of contract for the whole

per iod of lease.

I t is permissible that dif ferent amounts of rent are f ixed for dif ferent

phases dur ing the lease per iod, provided that the amount of rent for

each phase is specif ically agreed upon at the time of effecting a lease.

The determination of rental on the basis of the aggregate cost

incur red in the pur chase of the asset by the lessor, as normally done

in f inancial leases, is not against the rules of Shar iah.

BASICRULES OF IJARA


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Determination of Rental

The lessor cannot increase the rent unilaterally, and any

agreement to this effect is void.

The lease period shall commence from the date on which

the leased asset has been delivered to the lessee.

Rental wi l l be charged when the Leased asset is handed

over to the lessee.

BASICRULES OF IJARA


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IJARAAS A MODE OF

FINANCING

Leasing should not be interest-based loan or

replacing interest with rent, rather it shouldcomply with all of the following conditions of

Islamic leasing:


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IJARA AS A MODE OF

FINANCING1. The commencement of lease

Unlike the contract of sale, the agreement of Ijarah can be effected for

a future date. Hence, it is different from Murabaha.

2. Rent should be charged after the delivery of the leased asset to thelessee

and not from the day the price has been paid. If the supplier has

delayed the delivery after receiving the full price, the lessee should not

be liable for the rent of the period of delay.

3. Di f ferent relations of the parties

There are two separate relations between the institution and the client:

one of an agent and the other of a lessee.


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IJARA AS A MODE OF

FINANCING4. Difference between Murabahah and leasing

A Murabahah attributed to a future date is invalid inShariah. But leasing can be attributed to a future date.

A Murabaha can not be transacted on a future date as thesale would be executed simultaneously after takingdelivery from the supplier and seller would never bear its

risk which Shariah does not permit . But in leasing it ispermissible, because in leasing the asset remains under therisk and ownership of the lessor throughout the leasing

period.


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IJARA AS A MODE OF

FINANCING5. Expenses consequent to ownership to the lessor

As the lessor is the owner of the asset, he is liable to pay

all the expenses incurred in the process of its purchase and

its import to the country of the lessor for example expenses

of freight and customs duty etc.

6. Lessee as Ameen

The lessee is responsible for any loss caused to the assetby his misuse or negligence. He can also be made liable to

any normally occurring wear and tear.


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IJARA AS A MODE OF

FINANCING7. Var iable Rentals in Long Term Leases

In this case the lessor has two options:

A lease contract can have a condition that the rent shall beincreased according to a specified proportion (e.g. 5%)

after a specified period (like one year).

He can contract lease for a shorter period after which the

parties can renew the lease at new terms and by mutualconsent


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IJARA AS A MODE OF

FINANCING8. Penalty for late payment of Rent

The lessor cannot charge an additional amount in case thelessee delays payment of the rent.Penalty of late payment

is given to charity by lessee9. Termination of Lease

If the lessee contravenes any term of the agreement, thelessor has a right to terminate the lease contract

unilaterally. If not then it can be terminated throughmutual consent only. However, in such a case he cannotcharge rentals of remaining period. Further more, thedestruction of the asset also terminates the lease. In theevent of lessees death the lease will also be terminated


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IJARA AS A MODE OF

FINANCING10. Insurance of the assets

If the leased property is insured under the Islamic mode of Takaful, itshould be at the expense of the lessor and not at the expense of thelessee

11. The residual value of the leased asset

Through a mutual agreement of Lease, after the expiry of the leaseperiod, the corpus of the leased asset cannot be transferred to thelessee, otherwise it becomes hire purchase.

It is a well-settled rule of Islamic jurisprudence that one transaction

cannot be tied up with another transaction so as to make the former apre-condition for the other.

However, the lessor may enter into a unilateral undertaking to sell theleased asset to the lessee at the end of the lease period. Thisundertaking will be binding on the lessor only.


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IJARA AS A MODE OF

FINANCING12. I jarah Wa Iqtina

The lessor may sign a separate promise to gift/Sale the leased asset tothe lessee at the end of the lease period, subject to his payment of allamounts of rent. The validity of this arrangement is subject to twobasic conditions:

Firstly, the agreement of Ijarah itself should not be subjected tosigning this promise of sale or gift.

Secondly, the promise should be unilateral and binding on thepromisor only.

13. Sub-Lease

If the leased asset is used differently by different users, the lesseecannot sub-lease the leased asset except with the express permission ofthe lessor.


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When the client sells the asset to the bank the entire risk and rewards

are transferred to the bank who is then is responsible for the ownership

related expenses

In this case the bank is allowed to lease the asset to the client but there

are conditions which have to be followed to make the entire transaction

Sharia compliant.

There should be at least one year lease period

There should be separate contracts for sale and lease

The agreement to sell at the end of the lease must be separate

The intention of the client is to avoid interest related transactions

SALE AND LEASE BACK

ijara by zubair usmani

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