We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Ijarah Contracts Used By Islamic Financial Institutions - Essay Example

Comments (0) Cite this document
Islamic Accounting Table of Contents 1. Introduction 2. Types of Ijarah Contracts Used By Islamic Financial Institutions 2.1 Simple Ijarah (similar to an Operating Lease) 2.2 Ijarah Muntahia Bittamleek (similar to a Financing Lease) 2.3 Ijarah Mausufah Fi Zhimmah (A Forward Lease) 3…
Download paper
Ijarah Contracts Used By Islamic Financial Institutions
Read TextPreview

Extract of sample
Ijarah Contracts Used By Islamic Financial Institutions

It assists in strengthening the financial system of the country. The stronger the economy the stronger the country is. There are two kinds of banking systems and they are Islamic banking and the Conventional banking. Islamic banking is significantly different from conventional banking, and some of the differences are discussed in this essay. This report talks about an important feature in banking system i.e. lease. In conventional banks, it is referred to as conventional lease; and in Islamic bank, the lease is known as Ijarah. “Ijarah derives from the root word ajar a – to recompense, compensate or give a consideration and return. Ajr refers to a worker’s wage, and ujra h to rental payment.” (Kamali n.d.). Ijarah is a Shariah compliant alternative to Conventional lease. Through these two kinds of lease, bank performs as a Lessor and the individual to whom the asset is leased acts as a Lessee. The bank insists the lessee to pay an amount monthly for the use of the asset. The rights of the asset remains with the bank, and only the privileges of use are transferred to the lessee. 2. Types of Ijarah Contracts Used By Islamic Financial Institutions: 2.1 Simple Ijarah (similar to an Operating Lease) In a business world marred by financial uncertainties and increasing costs of operations, Ijarah loans are broadly considered as the safest, easiest, and the most efficient means to finance production procedures. Like all the other forms of Islamic financing, Ijarah too is rooted in the sound economic main attitude laid down by the Sharia. There are different types of Ijarah, each matched to the specific needs of the parties involved in the agreement. “The two most popular forms of Ijarah loans are the Simple Ijarah or Ijarah as an operating lease and Ijarah thumma al-bai or Ijarah as a financial lease. The distinguishing feature of Ijarah as an operating lease is that the lease contract is not associated with a purchase agreement.” (All About Ijara as an Operating Lease 2005). The following are some of the features of Ijarah as an operating lease: The whole price of the asset, or the part of property specified in the contract is not amortized through the main leasing tenure. The lessee can get out of the contract, that is, stop the Ijarah as an operating lease agreement anytime the lessee wishes to. On the other hand, the lessee should provide a notice prior to doing so. The real ownership of the piece of property or assets mentioned in the agreement is retained by the lessor. This agreement is executed irrespective of the quantity of payment the lessee has tendered, and that identifies the lessor’s insistence to bear every responsibility and risk connected with the ownership. In Ijarah as an operating lease, permits a part of the property to be returned to the lessor at the end of the leasing tenure. The lessor, which can be a bank or any other financial organization, can again lease the property, if it is a functioning unit, to a different person or business unit. 2.2 Ijarah Muntahia Bittamleek (similar to a Financing Lease) Ijarah Muntahia Bittamleek is an Ijarah dealing, in which the possession of the subject asset can be relocated to the lessee after the lease term. Ijarah and Ijarah Muntahia Bittamleek are by nature mere leasing contracts, in which the subject issue is the usufruct of the property; and not the quantity of cash, as in the case of a finance lease. In other words, it is not a financing deal, and instead, it is an alternative to financing ... Read More
Cite this document
  • APA
  • MLA
(“Ijarah Contracts Used By Islamic Financial Institutions Essay”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/8824-islamic-accounting
(Ijarah Contracts Used By Islamic Financial Institutions Essay)
“Ijarah Contracts Used By Islamic Financial Institutions Essay”, n.d. https://studentshare.net/finance-accounting/8824-islamic-accounting.
  • Cited: 0 times
Comments (0)
Click to create a comment
Use of ijarah sukuk by Islamic banks
The research aims to present and analyze the both the merits and demerits of Ijarah sukuk and its difference with conventional lease bond. The evaluation will also cover the consistency between Ijarah sukuk and Maqasid al-sharia and its implications over financial transactions affecting the Muslims.
12 Pages(3000 words)Essay
Islamic Accounting: Ijarah Contract
ognition 11 Expense Recognition 11 IFRS and AAOIFI Standards 11 Conclusion 12 References 14 Bibliography 16 Introduction The contract of leasing in Islamic accounting is termed as Ijarah contract. Its accounting procedures are very much similar to lease accounting procedures.
10 Pages(2500 words)Essay
The Similarities and Differences between Ijarah and Leasing
Islamic finance has become a centre of attention in the global financial market with its practice mainly focused on being ethical which is based on the teachings of Prophet Mohammad (P.B.U.H) and the Holy Scripture of the Muslims with the principle consistent with Shariah (Islamic law), The Holy Qur’an.
9 Pages(2250 words)Essay
Islamic Banking as a banking system that follows the ways of Islam
The principles stated in Islamic finance are very old. Islamic banking rules and regulations are based on the teachings of Islam religion. In Islam, short-selling, gambling, or uncertain money investments for abnormal profit maximisation are strictly prohibited.
10 Pages(2500 words)Essay
Islamic Banking and the Financial Crisis
According to Mavrakis (2009, pp. 2 – 5), Islamic finance has emphasised on trying to remove completely any interest involved in financial transactions. The Quran, which is the Divine revelation presented to Prophet Mohammed, who is the Prophet of Islam, expressly forbids charging of interest, or riba, and Prophet Mohammad himself emphasised on this as mentioned in the Hadith, which is the other source of Islamic law, the Shariah.
12 Pages(3000 words)Essay
Trends in the Global Emergence of Islamic Banking and Finance Practices
Shari’a compliant financial instruments are founded on principles that differ significantly from those of conventional banking, and therefore the broad based recourse to this financial system requires a rethinking of most countries’ financial, legal and reportorial frameworks as well as industrial, commercial, and even personal financial mindsets and practices.
4 Pages(1000 words)Essay
Islamic Banking in Bangladesh
More elaborately this report will show the importance of Islamic Banking, development model for a country through Islamic banking. 3) In the next part I discussed about the Islamic Banking in Bangladesh and try to show the situation of Islamic Baking through situation analysis.
12 Pages(3000 words)Essay
Is Islamic Financing better for Real Estate financing than the conventional Financing
Venardos, 2005) It is further reported that at a time when education, health and housing services are suffering from the financial stress in many countries, an embarrassing
9 Pages(2250 words)Essay
Islamic Banking and finance
A lot of arguments have cropped up in response to drawbacks associated with the profit and loss sharing (PLS) structure. These include issues like, risks associated with instruments of the PLS
18 Pages(4500 words)Essay
Islamic accounting and financial reporting
IFRS and Accounting, and Auditing Organization of Islamic Financial Institutions (AAOIFI) were founded based on establishing a unified way of reporting the financial transactions across all the sectors. However, the
9 Pages(2250 words)Essay
Let us find you another Essay on topic Ijarah Contracts Used By Islamic Financial Institutions for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us