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Shariaa' Financing

Al Ijarah

MODES OF LEASING Said one of the (damsels) "O my (dear) father! Engage Him on wages: truly the best of men for thee to employ is The (man) who is strong and trusty Al-Gasas 26 The Prophet (PBUH) said: "Whoever hires a worker must inform him of his wage". Bayhaghi Characteristic Traits of Modes of Leasing Lease is the employment of money in operations other than sale and purchase operations. That is the subject if the operation is the sale of the benefit of the asset not the asset itself. These operations aim at obtaining the rentals and the proceeds by receiving the benefits of the asset through time. The most important traits of lease operations: * They basically enable the lessee to possess and use the assets it needs without pumping large amounts of money. * Lease operations do not transfer the ownership of the assets, they only transfer the ownership of the benefits. * Profit is independent from the corresponding value of the asset it is a rental that accrues from the renewal of benefit. * Lease operations are usually not immediate but medium term operations. Divisions of Modes of Leasing The jurists divide Lease operations into two kinds: Lease for the benefits: It is a contract on assets. That is to deliver an asset under possession to whoever can use it for a specific recompense. This type of lease contract can be drawn on two kinds of assets. * Lease of movable assets, such as clothes, jewelry or appliances. * Lease of fixed assets such as houses, office buildings, etc. "Ijara" for labour: The subject of the contract is a specific piece of work for a certain wage. This kind of Ijara takes two forms: * Private worker: It is he who works with one person for a specific wage and he is not allowed to work for others. * Public worker: It is he who works for the public. The Islamic banks use the lease for the benefits as an instrument of financing. They purchase possessions and fixed assets to let, where the assets are pub at the disposal of the customer to utilize in return of rental. The banks use the two modes of Ijara. * Operation Lease * Lease - Purchase

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