Ijara by Mehmood Shafqat 25-10-07

Top 20 FREQUENT WORDS

ijarah 96 asset 65 lease 43 lessee 40 islamic 37 leased 33 contract 31 leasing 28 lessor 26 banking 23 customer 20 conventional 19 agreement 18 bittamleek 18 muntahia 18 rentals 17 payment 16 shariah 16 amount 15 ownership 12 rental 12

DOCUMENT KEY POINTS

brief history of islamic banking in pakistan i R efforts for economy wide elimination of riba started during s and most of the practical steps were taken in early s which are considered as pioneering work in the muslim world
i R banking and other relevant laws and regulations were amended to facilitate interest free banking system

i R lack of continued research and development in the field of islamic finance and economics
failure of previous efforts reasons i R absence of shari ah compliance mechanism in financial institutions

standard agreements i R essentials of islamic modes i R pls mechanism i R modes of finance i R shariah compliance mechanism i R essentials of islamic modes i R shariah advisor i R internal shariah review i R report of shariah advisor i R sbp shariah compliance inspection i R sbp shariah board
straight jacketed system i R model vs

i R meezan bank a in cities al baraka islamic bank with in cities dubai islamic with in cities bankislami with in cities emirates global with in cities and dawood islamic with in cities
industry progress i R sept one full fledge bank and one conventional bank with one stand alone islamic banking branch i R currently six full fledge islamic banks and conventional banks with islamic branches

in bn age of banking industry
in billion jun dec decdecdecdescription total assets rs

i R over countries have islamic banking institutions i R muslim countries including bahrain uae saudi arabia malaysia brunei pakistan sudan iran indonesia etc
global perspective i R the size of islamic financial industry is around us bln

global perspective i R in feb dow jones introduced the dow jones islamic market index djim of companies world wide whose business complies with islamic shariah laws i R at present there are more than islamic funds operational through out the world with a total fund base of over usd
billion

global perspective i R governments of bahrain malaysia and pakistan have issued islamic bonds sukuk in order to facilitate islamic banks in managing their liquidity
i R issuance of these bonds has also paved the way for shariah compliant government borrowings

these are characterized based on the method by which the ownership transfers to the user i R for no consideration through a gift i R for token consideration i R for price specified in the lease i R for remaining amount if lease is terminated before period i R gradual transfer
ijarah muntahia bittamleek i R this is a lease that ends with the ownership of the asset

only such assets which are owned by the lessor can be leased out except that a sub lease is effected by the lessee with the express permission of the lessor
any thing which cannot be used without consuming the same cannot be leased out like money edibles fuel etc

if any damage or loss is caused to the leased assets due to the fault or negligence of the lessee the consequences thereof shall be borne by the lessee
ijarah leasing during the entire term of the lease the lessor must retain title to the assets and bear all risks and rewards pertaining to ownership

the insurance of the leased asset should be in the name of lessor and the cost of such insurance borne by him
ijarah leasing the lessee is also responsible for all risks and consequences in relation to third party liability arising from or incidental to operation or use of the leased assets

ijarah leasing either party can make a unilateral promise to buy sell the assets upon expiry of the term of lease or earlier at a price and at such terms and conditions as are agreed provided that the lease agreement shall not be conditional upon such sale
alternatively the lessor may make a promise to gift the asset to the lessee upon termination of the lease provided the lessee has fulfilled all his obligations

ijarah leasing the amount of rental must be agreed in advance in an unambiguous manner either for the full term of the lease or for a specific period in absolute ter miss assignment of only the lease rentals is not permissible except at par value
however if the leased asset is damaged during the period of the contract but is capable of being repaired the contract will remain valid

the banks can also approach competent courts for award of damages at discretion of the courts which shall be determined on the basis of direct and indirect costs incurred other than opportunity cost
in that case lessee shall be liable to pay penalty calculated at the agreed rate in percent per day annum

it is permissible for the institution to require the lease promisor customer to pay a sum of money to the institution to guarantee the customer s commitment to accepting a lease on the asset and the subsequent obligations provided no amount is to be deducted from this sum except in proportion to the actual damage suffered by the institution
this standard is applicable to operating leases of properties or to ijarah muntahia bittamleek

a if the asset or the usufruct thereof is owned by the institution which should in principle be the case an ijarah contract may be executed as soon as agreement is reached by the two parties

the period of ijarah should commence on the date of execution of the contract unless the two parties agree on a specified future commencement date resulting in a future ijarah that is an ijarah contract to be executed at a future date
i R the duration of an ijarah contract must be specified in the contract must be specified in the contract

i R the lessor may not stipulate that the lessee will undertake the major maintenance of the asset that is required to keep it in the condition necessary to provide the contractual benefits under the lease
ijarah and ijarah muntahia bittamleek subject matter of ijarah i R the leased asset must be capable of being used while preserving the asset and the benefit from an ijarah must be lawful in sharia

i R in case the rentals is subject to changes floating rentals it is necessary that the amount of the rentals of the first period of the ijarah contract be specified
it is then permissible that the rentals for subsequent periods be determined according to a certain benchmark

i R it may be provided in the contract of ijarah or ijarah muntahia bittamleek that a lessee who delays payment for no good reason undertakes to donate a certain amount or percentage of the rentals due in case of late payment
i R permissible security of all kinds may be taken to secure the rental payments or as security against misuse or negligence on the part of lessee

i R it is permissible to terminate the lease contract by mutual consent but it is not permissible for one party to terminate it except in case of force majeure or there is a defect in the leased asset that materially impairs its use
termination is also possible when one party secures an option to terminate the contract in which case the party who holds the option may exercise it during the specified period

i R in ijarah muntahia bittamleek the method of transferring the title in the leased asset to the lessee must be evidenced in a document separate from the ijarah contract document using one of the following methods
i R by means of a promise to sell for a token or other consideration or by accelerating the payment of the remaining amount of rental or by paying the market value of the leased property

leasing ijara wa iqtina beneficial use transfer of asset of asset financier entrepreneur vendor lessee lessor payment of lease rentals purchase price i R another popular instrument a of the transactions i R right available to lessee to purchase i R asset ownership risk with owner operational risks with lessee i R features close to a financial lease i R used for machinery equipment property vehicles aircraft etc
i R ownership usually transferred at the end

issues asset price risk repair and maintenance running expenses depending upon contract credit risk default in rental payment
ijarah leasing ijarah operating lease examples houses rent a car agricultural durables aircrafts etc

i R time of transferring asset in sale and lease back i R islamic lease covers the conditions of finance lease as described in ias
risks and practical issues i R proper documentation i R sequence of documentation in sale and lease back

risks i R credit risk i R rate of return risk i R customer may decline to enter into ijarah
i R damage to asset i R overdue rentals i R non compliance violation of contract

risks and practical issues i R how to treat insurance cost paid by the lessor i R treatment of security deposits received from customers
i R accounting rule policy regarding repairs of leased assets

leasing ijarah contract conventional leasing car ijarah there are two types of contracts the ijarah contract does not contain financial lease and loan for car any condition that makes the contract financing
financing lease contains conditions of hire purchase which is not permissible by sharia h

rights liabilities of lessor and lessee conventional leasing car ijarah in conventional leasing products the all risks pertaining to ownership are customer is responsible for all kinds borne by lessor

rentals recovery in case of theft and loss conventional leasing car ijarah if the leased asset is stolen or under the islamic ijarah rent is completely destroyed the consideration for usage of the conventional leasing company or leased asset and if the asset has bank would continue charging the been stolen destroyed or lease rent till the settlement of the temporarily out of order and not in insurance claim use of customer the concept of rental becomes void
in such situations rental is not charged from the lessee

penalty for late payment conventional leasing car ijarah in most contemporary financial under ijarah the lessee may be leases an extra monetary amount is asked to undertake that if he fails charged if rent is not paid on time
to pay rent on its due date he will this extra amount is the considered pay a certain amount to a charity riba and is haram

the insurance expense of the lessor and not at the expense of the asset is directly expense of the lessee
the lessor borne by the lessee may increase the lease rent to recover any costs incurred by him in connection with the asset

registration charges conventional leasing car ijarah lessee is responsible for the the leased asset vehicle is registration of leased vehicle

purchase of asset conventional leasing car ijarah under conventional leasing contracts there is not such clause in the ijarah the vehicle is automatically transferred agreement that leased asset will in the name of the customer upon automatically transfer to lessee
completion of the lease period whether or not he wants to purchase separate sale agreement is required to it

commencement of rentals conventional leasing car ijarah in case of booking of leased asset in case of car ijarah the recovery recovery of lease installment of rentals is associated with delivery commence after the payment of cost of leased asset
rental recovery should not be commenced before the delivery of asset

signing of lease contract conventional leasing car ijarah lease agreement can be signed by the in case of ijarah the ijarah agreement lessee and lessee any time even if the can not be signed by the lessor and leased asset is not owned by the lessee unless customer
i asset has come in to existence i assets is in the ownership of the lessor i lessor has taken possession of the asset

termination before delivery conventional leasing car ijarah the customer will suffer loss of the loss of customer is only limited to interest paid during the booking period actual loss if any suffered by the because installment commence lessor on sale of asset in the open immediately after payment of cost of market
since the customer has not paid any rental during the booking period no other cash loss is expected under ijarah

ijarah agreement ijarah agreement is the basic document which contains all terms and conditions pertinent of ijarah of particular asset s
ijarah agreement shall be signed after the lessor has taken the possession the asset and not earlier

description of ijarah asset this document contains the detailed description about the leased asset agreed between the partiesname make model engine no
this documents shall be signed signed after delivery of asset to the lessee and not earlier

schedule of ijarah rentals this schedule contains a table which shows amount of rental monthly quarterly half yearly date of payment of each rental this schedule will also contain the date on which first rental is due
this documents shall be signed signed after delivery of asset to the lessee

receipt of assets this document confirms that customer has taken the possession of leased asset as described in the earlier document description of ijarah asset
this document is only signed by the lessee on receipt of asset as an acknowledgement of receipt of described asset under ijarah contact

promissory note after signing of ijarah agreement the amount of rentals become debt dyan to the lessee
promissory note is lessee s acknowledgement to debt amount and its promise to pay

undertaking to purchase leased asset this documents contains undertaking from the lessee that he it will purchase the leased asset on the purchase price corresponding to the purchase date
this document contains a schedule which shows purchase price s during the ijarah term on which the lessee can purchase the asset by making lump sum payment

on the level of qur an allah says said one of them a o my father engage him on wages surah al qasas verse the saying of the prophet hazrat muhammad sallallau alihi wsallam that whoever hired a worker must inform of his wages ibn e majah sanan ibn e majah give a worker his wages before his sweet is dried ibn e majah sanan ibn e majah
shari ah legitimacy ijara tul ashkhas ijarah delivers legitimacy from the qura an and the sunnah

for example there may be three parties one is the services provider the principal lessor second is bank the principal lessee which will avail these services on spot prompt or deferred payment basis from the principal lessor and the third is actual services seeker the sub lessee according to the aforesaid shari ah principle bank can devise consumer as well as corporate products for its clients from the services providers on either prompt or deferred payment basis
if the client fails to make payment on due dates according to pre agreed schedule then bank will be entitled to only receive charity from the client for the defaulted period but this charity will not be taken into bank income rather bank will have to pay this charity amount to some approved charitable institutions

our lord let not our hearts deviate now after you have guided us but grant us mercy from your own presence for you are the grantor of bounties without measure
surah ali a imran

thank you ph fax email mahmood
pk http www dot sbp

Please note, This is an auto generated summary based on sentances position in the document and other factors

DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\islamic banking

KeyWords

contract price sale asset financing lease client purchase ijarah payment profit musharakah lessee amount commodity housing agreement contracts ownership project

DOCUMENT REFERENCES

Number of Pages

73

Published Date

2016-09-17 00:25:46

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Ijara by Mehmood Shafqat 25-10-07

Contents

Top 20 FREQUENT WORDS

DOCUMENT KEY POINTS

DOCUMENT WORD ANALYSIS

Main Category

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