IJARAH is an operating lease where by the bank will buy and lease out equipment required by the customer for an agreed rental fee. That contract can take the form of either an “Operating IJARAH” or “Financing IJARAH (Muntahia Bittamleeh)”. In either case the bank buys assets and leases them to a customer. Under either contract form, ownership of the assets remains vested in the bank and the payments received from the customer constitute the rental payments. If the lease is an IJARAH (Muntahia Bittamleeh) titled to the assets eventually passes to the customer in one of the following manners:

 

1. 1.Gift, after all lease payment have been made.

    

2. 2.Sale for a token consideration at the end of the lease term.

    

3. 3.Sale prior to the end of the lease term for the equivalent of the remaining IJARAH installments.

    

4. 4.Gradual sale of the leased assets to the customers.