IJARAH – (Lease to Own)
In mode of financing, lease is simply a transaction in which transfer of a property from one person to another person for an agreed time period on rental basis. Ijarah is an Islamic leasing contract, representing one of the most common modes of Islamic finance currently practice. Its popularity is due to strong parallel to convential leasing concept. The process of ‘Ijarah’ is very simple and easy to understand. This has been derived from the Arabic term "Ujr" or "Ujrat" which means 'consideration' or 'return' or 'wages'. In simple words ‘Ijarah’ defines; contract of hiring, renting and leasing. This mode of financing is use in case of equipment as well as property. This mode of financing is better for both lessee and lessor. According to Islamic Shariah based rule, Ijarah is an agreement between the two parties (Lessor and Lessee. In this mode of financing; an owner (Lessor) transfers its usufruct to Lessee for an agreed time period on contract basis. In return, lessee obligation is to pay specific rent or rental for a fixed period. Period of lease and rental determined at the time of agreement. In Pakistan, this mode of transaction gained popularity to purchase car. Several products have been introduced by banks and institution to facilitate customers and provide car on affordable prices and rental prices.
1. The Lessor (Mujjir) - The individual or organization who leases out/rents out the property or service is called the Lessor. 2. The lessee: (Mustajir) - The individual or organization who hires/takes the lease of the property or service against the consideration rent/wages/remuneration is called the lessee (Mustajir). 3. The Benefit (Maajur) - The benefit that is leased/rented out is called the benefit (Maajur). 4. The rent (Aj'r or Ujrat) - The consideration either in monetary terms or in quantity of goods fixed to be paid against the benefit of the goods or service is called the rent or Ujrat or Aj'r....
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