Answer: The customer approaches
the bank and expresses his desire for a particular asset/property. The bank
acquires that asset as per undertaking of the customer to acquire the said asset
on Ijarah basis. The bank leases (transfers the use of the asset) it to the
customer for an agreed period of time and against an agreed amount of rentals.
An Ijarah agreement, signed between the bank and the customer, stipulates all
the relevant conditions with regard to the transaction. According to this
agreement the bank is Lessor and the customer is Lessee. During the Ijarah
period, the corpus of the leased property remains in the ownership of the bank
and only its usufruct is transferred to the lessee. The following main points
are considered in the Ijarah transaction:
1. As the corpus of the leased asset
remains in the ownership of the Islamic bank, all the liabilities emerging from
the ownership shall be borne by the bank. It is necessary for a valid lease
that the leased asset is fully identified by the parties.
2. The lessee
(customer) cannot use the leased asset for any purpose other than the purpose
specified in the lease agreement. However, if no such purpose is specified in
the agreement, the lessee can use it for whatever legitimate purpose it is used
in the normal course.
3. The lessee is liable to compensate the lessor
(bank) for any harm to the leased asset caused by any misuse or willful
negligence. The leased asset shall remain in the risk of the bank throughout
the lease period in the sense that any harm or loss caused by the factors
beyond the control of the lessee shall be borne by the lessor.
4. A property
jointly owned by two or more persons can be leased out and the rental shall be
distributed between all joint owners according to the proportion of their
respective shares in the property. A joint owner of a property can lease his
proportionate share only to his co-sharer and not to any other person.
5. The
rental must be determined at the time of contract for the whole period of
lease. It is permissible that different amounts of rent are fixed for different
phases during the lease period, provided that the amount of rent for each phase
is specifically agreed upon at the time of executing a lease. If the rent for a
subsequent phase of the lease period has not been determined or has been left
at the option of the lessor, the lease is not valid.
6. The determination of
rental with regard to the aggregate cost incurred in the purchase of the asset
by the lessor, as normally done in financial leases, is not against the rules
of Shariah, if both parties agree to it, provided that all other conditions of
a valid lease prescribed by the Shariah are fully adhered to.
7. The lessor
cannot increase the rent unilaterally, and any agreement to this effect is
void.
8. The lease period shall commence from the date on which the leased
asset has been delivered to the lessee.
9. If the leased asset has totally lost
the function for which it was leased, the contract will stand terminated.
10.
The rentals can be used on or benchmarked with some Index as well. In this case
the ceiling and floor rentals would specifically be mentioned in the agreement
for validity of lease.
11. At the end of the lease period, the ownership of the
property may be transferred to the lessee against a nominal price through a
separate sale deed to be executed after the expiry of the lease.
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