Ijarah Financing

Ijarah Financing is a form of purely rental services or lease contract that offers the lessee an option to own the Assets, machineries, trucks…at the end of the specified lease periods. This financing scheme is categorized into two Major types: Diminishing Ijarah and Operating Ijarah.

Diminishing Ijarah

Diminishing Ijarah is a form of lease contract that offers the lessee an option to own the asset at the end of the lease period whereas Operating Ijarah is a pure rental services whereby the legal title will remain in the hands of the Bank after the lease period is due. The Bank may or may not sale the goods.

Unique Features and benefits of Financing Ijarah

  • Free of Riba (interest) and sharia compliant service;
  • The bank collect rental and property fee on installments and transfer ownership of the property to the client;
  • The Bank may ask collateral for this kind of service.

Unique Features and benefits of operating Ijarah

  • Sharia compliant financing service;
  • The leased asset’s use is specified in the contract;
  • Monthly rent fee payment according to the contract;
  • Use of property is clearly specified in the contract;
  • If the lessee defaults on payments or delays payments, the bank can’t charge compound interest but high punishment;
  • The lessee has the rights to use the assets and is responsible for normal maintenance;
  • The Bank may ask collateral for this kind of service.