Ijarah AgreementPosted: December 11th, 2020 | Author: Paul | Filed under: Uncategorized | Leave a comment »
In today`s Islamic finance, ijara mawsoofa bi al dhimma is renting something (such as a house, office or factory) that has not yet been produced or built. This means that the contract ijara mawsoofa bi al dhimma is combined with an Istisna contract for the construction of what it is that will provide the service or utility.  The financier finances its manufacture, while the party begins to harm the asset after “delivering” it. While futures sales generally do not comply with Sharia law, ijarah is permitted to be used, provided that the rent/lease payment does not begin until the customer receives delivery. Sharia law also requires that the asset be clearly specified and that the rental rate be clearly defined (although the interest rate may vary on the basis of the agreement of both parties).  This is one of the most frequently concluded Ijara contracts and is favoured by companies seeking financing to finance their purchasing opportunities, machinery and certain forms of capital such as land and buildings. This form of ijara contract has many similarities to the conventional form of the financing lease. In this agreement, the person who needs immediate money sells an asset or property that he owns to the bank. He then rents it back for a fixed period and pays the bank`s rent for the use of the asset. However, the bank now holds the assets; At the end of the term of the contract, it transfers ownership to the client. In a “forward ijarah” or ijara mawsoofa bi al dhimma Islamic contract(literally” “lease with responsibility”, even transliterated ijara mawsufa bi al thimma), the service or benefit that is rented is well defined, but the particular unit that offers this service or benefit is not identified.
Therefore, if a unit that provides the service or delivery is destroyed, the contract is not at the end of the contract.  The simplest of all ijara contracts, simply ijara, is a form of operational leasing contract whereby the owner of the property or asset continues to exercise property rights, bears the costs of maintaining the assets and also bears the risks arising from its use. This is a short-term contract by which the tenant can opt out of the agreement at any time, albeit after notice.