Ijarah

It is a leasing agreement whereby the bank buys an asset and leases it to the customer over a specific period of time, translating to “letting on lease”. Technically, sale of a definite usufruct in exchange for a definite reward. It is an arrangement under which an Islamic bank leases equipment, a vehicle, a building or other facilities to a client against an agreed rental. Bank commonly uses Ijarah as an alternate to conventional Car Loan, where Bank purchase the car and gives it to the customer on rent for a specific duration.