Islamic Finance : Ijarah

Dr. YaserAl-Kulaib

Group members :
Waleed AL.Furaih
Ahmad AL.Dousari
Salman AL.Mutairi

Definition

Literally means: to give something on

rent.

It is defined as: ownership of the right to

the benefits of using an asset in return for
consideration {Rent}.

Ijarah Types
Situation

Transfer of ownership

Operating Ijarah

Financial Ijarah

Contracts that do not

end with the transfer
of ownership of
leased assets to the
lessee.

Contracts that end up

with of ownership of
leased assets to the
lessee.
Gift at the end of
period.
Token of sale
consideration at the
end of period.
Sale at specific
amount.
Sale during the
lease
period for the
remaining
installments.
- Gradual transfer
during lease period
-

Elements of Ijarah

1. Wording.
2. Contracting Parties.
3. Subject Matter {Benefit}.

Regulation of Ijarah
1. Leasing ( Ijarah ) is a contract . the owner of an asset
transfers it to another person for an agreed period, at an
agreed payment ( ujrah ) .
2. The assets must have a value
3. Must remain in the ownership of the person who own
it .
4. The things that considered as a liabilities on the
property remains on the owner but the things that
considered liability use of the property is on the lessee .

6.The lessee cant use the property ( asset) for

any other purpose stated on the contract .
7. The lessee repay the lessor if he caused any
harm or damage to the property.
8. natural causes damages the asset the owner
cant ask the lessor to repay him .
9. If the property owned by two persons or more
their shares distribute depending on their

10.The owner can give his share of the rent

to his partner not to any other person .
11.The the lessee must identify the asset ,
12. The rental must be determined at the
time of contract for the whole period of
lease.

lasing allowed by the

Shariah

Ijarah is halal because its follow

Quran, sunna and Alejmaa

Waleed has decided to study abroad after three

years . So he was wondering what is the best
option he got for buying or leasing a car . He
has chosen the toyota FJ 2013 basic options
silver color automatic gear . So he asked salman
what is the best way? buying or leasing a car
and Salman said buying a car by a ijarah
contract or murabaha contract in KFH since the
other islamic banks such as the ahli united bank
only got one type of ijarah ( ijarah muntahya
bltamleek ) but Ahmed does not agree with
Salman and told Waleed that since there isnt an
ijarah contract in NBK you can always take a
loan and buy the car or rent a car from a car
rental company like Aayan leasing company that
follow the islamic way of renting . So Waleed

(A) KFH Ijarah

The car cost 10000 KD for three years the bank will lease it
to waleed at a total cost 10984 KD . Monthly payments
165 KD , Down payment 1000 kd and the car book value
( 4950 after three years ) .
(B) NBK Loan
In NBK waleed decided to take a loan 10000 KD for three
years with 300 KD monthly payments . The contract is
Without down payment but they offer maintenance for 20
KD each 3 months. Total cost of the loan with interest
10800 with nominal rate 5%.

(C) KFH Murabaha contract

The car cost 10000 KD with murabaha contract it will cost
10800 with monthly payments 300 KD for three years
without down payments .

(D) Aayan lessing company

The car cost 10000 KD with down payment 599 KD ,
monthly payment 222 KD for 2 years ,the cost for two
years contract cost 80 KD , the book value for the car after
two years 8000 KD

Company or bank :

Nom I :

EAR :

KFH ( IJARAH )

3.906 %

3.977 %

NBK ( Loan )

6.53 %

6.73 %

AAYAN

22.929 %

25.43 %

KFH ( Murabaha )

5.218 %

5.345 %

We conclude that KFH

ijarah is the best for
waleed because its has

Conclusion

We now know how the ijarah works and

operates . Its one of the most important
islamic financing instruments . the
islamic finance protect people from
falling In reba or any garar actions so our
investments and assets stays halal.