IJARA AS ISLAMIC LEASE CONTRACT

A key principle of Ijara is that the leased asset must be halal (permissible under Shariah), clearly identified, and deliverable. The rental amount can be fixed or variable, but it must be agreed upon in a transparent manner, avoiding gharar (excessive uncertainty).

In practice, Ijara contracts are widely used for financing equipment, vehicles, property, and even large infrastructure projects; a common variation is Ijarah Muntahia Bittamleek (lease ending with ownership), in which the lessee may acquire ownership of the asset at the end of the lease through a separate sale contract or donation.

Role of Ijāra in Islamic Finance

• Alternative to interest-bearing loans: Provides Sharia-compliant asset financing.
• Supports real economy: Ensures transactions are linked to tangible assets or services, not speculative money.
• Risk-sharing: Lessor retains ownership and bears ownership risks, while lessee pays rent for usufruct.
• Flexibility: Can be structured for consumer goods, housing, industrial equipment, or even infrastructure projects.
• Ethical finance: Promotes fairness by separating rent (payment for use) from profit/loss of ownership.

How does Ijara apply to a car or property ?

Car (Ijara): The bank buys the car and leases it to the customer for fixed rent. The customer uses the car, pays operating costs (fuel, service), while the bank handles ownership-related risks. At the end, ownership may transfer through a separate sale (Ijarah Muntahia Bittamleek).

Property (Ijara): The bank buys the house/property and leases it to the client. The tenant pays rent, covers utilities and minor upkeep, while the bank handles major ownership duties. Ownership can pass to the client at the end if agreed in a separate acquisition clause.

In both cases, ownership and risk stay with the bank during the lease, unlike conventional loans where the bank just charges interest.

What are the types of Ijara and what is their role ?

Types of Ijāra

There are several forms, depending on whether it is about services, assets, or financing:

1. Ijāra of Services (Hiring people)
   • A contract where someone hires the services of a person (like an employee, consultant, or worker) for a wage.
   • Example: Employing a teacher, doctor, or driver.
2. Ijāra of Usufruct (Leasing assets)
   • A contract to lease the usufruct (the right to use) of an asset, while ownership remains with the lessor.
   • Example: Renting a house, car, or equipment.
3. Ijāra Muntahiyah bi-t-Tamlīk (Lease-to-own / Ijārah wa Iqtināʾ)
   • A financing contract where the asset is leased to the client, with an option or promise to transfer ownership at the end (by sale or gift).
   • Common in Islamic banking for financing cars, homes, machinery.
4. Operating Ijāra (Pure lease)
   • A simple rental contract with no transfer of ownership at the end.
   • Example: Renting office equipment for a fixed term.
5. Financial Ijāra (Used in Islamic finance)
   • Used as an alternative to interest-based loans. The bank buys an asset (like real estate or equipment) and leases it to the client for an agreed rent.
   • Ownership stays with the bank, but risks (like insurance/major maintenance) may be borne by the bank, depending on the terms.

---

Which Islamic institutions propose Ijara for cars and properties worldwide?

• There’s a region-wise snapshot of well-known Islamic institutions that publicly offer Ijārah-based financing for cars and/or properties (lease / lease-to-own, including forms like Ijārah Muntahiyah bi-t-Tamlīk and AITAB). Availability and eligibility vary by country.

Middle East (GCC)

• UAE: Dubai Islamic Bank – Auto Ijārah (cars) and business ijārah; Emirates Islamic – home finance; ADIB (Abu Dhabi Islamic Bank) – car finance and home finance that uses ijārah variants. ADIB
• Saudi Arabia: Al Rajhi Bank – Sharia-compliant home finance programs. مصرف الراجحي1
• Qatar: Qatar Islamic Bank (QIB) – home finance. QIB
• Kuwait: Kuwait Finance House (KFH) – real-estate Ijārah (lease-to-own). KFH

South Asia

• Pakistan: Meezan Bank – Car Ijārah (interest-free car leasing); calculators and product pages. Meezan Bank
• Bangladesh: City Bank (Islamic) – Islamic auto finance (Sharia-compliant structure for vehicles). ijaracdc.com

Southeast Asia (common AITAB = Ijārah + sale)

• Malaysia: Maybank Islamic – AITAB vehicle financing; Bank Islam Malaysia – AITAB / Vehicle Financing-i; Public Islamic Bank – AITAB Hire Purchase-i. Maybank+4

Europe (UK)

• Al Rayan Bank (UK): Home Purchase Plans structured on Islamic contracts (widely include ijārah elements). AlRayan Bank
• Kuwait Finance House (UK): Islamic home purchase plans for UK properties. uk.kfh.com

North America

• IjaraCDC (USA/Canada): Ijārah-structured home financing solutions across residential & commercial. ijaracdc.com

Africa

• Nigeria: Jaiz Bank – Home financing based on Ijārah Muntahiyah bi-t-Tamlīk / Ijārah wa Iqtināʾ (lease-to-own).
• Egypt: Faisal Islamic Bank of Egypt – products branded Ijara/Ejara among retail offerings. faisalbank.com.eg

ISLAMIC-CAR-LOAN  AUSTRALIA  USA  UK  ISLAMIC-LOAN-WITHOUT-INTEREST  SOUTH-AFRICA  CANADA  ISLAMIC-PERSONAL-LOAN  ISLAMIC-LOAN-CALCULATOR  ISLAMIC-BUSINESS-LOAN  ISLAMIC-LOAN-FOR-STUDENT  HALAL-MORTGAGE  BELGIUM  NETHERLANDS  ISLAMIC-COLLEGE SCHOLARSHIP  LIST-OF-ISLAMIC-BANKS  UAE  ISLAMIC-LIFE-INSURANCE  ISLAMIC-LEASING  ISLAMIC-CAR-INSURANCE  IRELAND  INDIA   GERMANY  QARDH-UL-HASAN  IJARAH-WA-IQTINA  USA-ISLAMIC-INSURANCE  INDIA-ISLAMIC-INSURANCE  SPAIN  UK-ISLAMIC-INSURANCE  MOROCCO  SWEDEN  ISLAMIC-LOAN-FOR-STARTUP  NEW-ZEALAND  ISLAMIC-HEALTH-INSURANCE  ISLAMIC-TRAVEL-INSURANCE  ISLAMIC-CREDIT-CARD  IJARA  HAWALA  ISLAMIC-FUNERAL-INSURANCE  NORWAY  DENMARK  MALAYSIA  MURABAHA  FRANCE  QATAR  ITALY  ETHIOPIA  CANADA-ISLAMIC-INSURANCE  PAKISTAN  MOSQUE-INSURANCE  SWITZERLAND  AUSTRALIA-ISLAMIC-INSURANCE  ALGERIA  AUSTRIA-ISLAMIC-LOAN  SINGAPORE  EGYPT  LONDON-ISLAMIC-LOAN