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The Similarities and Differences between Ijarah and Leasing - Essay Example
Author : annapfeffer
Finance & Accounting
Pages 9 (2259 words)
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. …
Since the banking crisis around the world, many countries have shifted to an alternate banking system such as the Islamic banking system in which there is a mechanism of sharing profit and loss and using fixed service charges instead of interest charges which eases the pressure on the economy. Some prohibitions and certain guidelines have been drawn by the Shariah law, which makes a clear comparison between the conventional finance system and Islamic finance system. The unlawful charging of the interest, Riba, is the foremost concept that is prohibited by the Islamic Shariah, while it also prohibits gharar, an uncertainty in activities and has made gambling, Maisir, forbidden which makes it to differ from the conventional finance system in which interest is considered to be a common ground.
In an Islamic term, Ijarah is an agreement to offer something for a lease, rent, or wage. According to a different meaning in Islamic fiqh, Ijarah is also referred to as a payment offered to a person for the services that were delivered by the same person. However, if the term Ijarah is considered in the setting of Islamic banking, it is referred to as the process of transference of a particular property from one person to another in exchange of a lawful return or rent from the owner. The procedure involves the lawful transference of the asset from the owner to the lessee and ends with the purchase of the leasing object. ...