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IJARAH AN ISLAMIC
FINANCE PRODUCT

IJARA AN ISLAMIC FINANCE PRODUCT

PRESENTER : ALI RIZWAN Management Trainee 2011 National Bank of Pakistan

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LAYOUT
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o o o o o o o o o

Meaning & Concept of IJARAH Types of IJARAH Flow Chart Characteristics of IJARAH Traces from QURAN-O-SUNNAH Difference from conventional Lease Practical Examples Final Analysis Q/A Session
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IJARA AN ISLAMIC FINANCE PRODUCT

IJARAH
oMeaning

:to give something on rent

oIslamic

alternative of conventional leasing of legal rights to use for some

oTransferring

consideration

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TYPES OF IJARAH
oIJARAH AL ASHKAAS oIJARAH-WA-IQTINA

IJARA AN ISLAMIC FINANCE PRODUCT

FLOW CHART
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.
VENDOR ISLAMI BAN
C K
Agreeme nt

CUSTOMER
IJARA AN ISLAMIC FINANCE PRODUCT

CHARACTERISTICS OF IJARAH
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o o o o o o

Transferring of usufruct not ownership The period of lease must be determined in clear terms. All consumable things cannot be leased out All liabilities of ownership is borne by lessor Leased property is insured at lessors expense Lease for specific purpose

IJARA AN ISLAMIC FINANCE PRODUCT

CONT.
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o o o o o

Loss caused by mis-use or negligence Loss caused by factors beyond lessee control Rentals are fixed at the beginning of contract Different rent amounts for different phases can be fixed Commencement of lease period

TRACES FROM QURAN-OSUNNAH

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And said one of them (the two women): "O my father! Hire him! Verily, the best of men for you to hire is the strong, the trustworthy. He said: "I intend to wed one of these two daughters of mine to you, on condition that you serve me for eight years, but if you complete ten years, it will be (A favour) from you. But I intend not to place you under A difficulty. If allah will, you will find me one of the righteous." (28:267) * Abdullah ibn umar narrates, Allah's apostle gave the land of khaibar to the jews to work on and cultivate and take half of its yield. Ibn 'umar added, "the land was used to be rented for a certain portion (of its yield)." (Sahih al-bukhari)
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IJARA AN ISLAMIC FINANCE PRODUCT

DIFFERENCE BETWEEN IJARAH AND CONVENTIONAL LEASE

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LEASING Starting Time Of Rentals Penalty Insurance Rentals

IJARAH

When Agreement Takes Place When Good Is Delivered Lessor Interest Based Insurance Include interest Charity Takaful Includes profit

IJARA AN ISLAMIC FINANCE PRODUCT

PRACTICAL EXAMPLES FROM PAKISTAN

o o o o

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UBL Ameen Auto Ijarah Meezan Bank Car Ijarah Bank Alfalah car Ijarah Bank Al Baraka Ijarah Muntohia Bittamleek

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FINAL ANALYSIS
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o
o

o o

Asset-based financing Element of risk No Riba Profit based on KIBOR as benchmark

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IJARA AN ISLAMIC FINANCE PRODUCT

QUESTIONS

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07/24/11 IJARA AN ISLAMIC FINANCE PRODUCT