Ijara: financing an asset through leasing, with or without final purchase
AmanaFi team · Updated · 1 min read
Ijara is a lease contract: the owner makes an asset available in return for rent. Used for financing, it lets you gradually acquire a home or a vehicle without an interest-bearing loan.
The principle
The lessor remains the owner and bears the risks of ownership, such as major repairs. The lessee pays rent for the use. The rent is agreed in advance, over a defined period.
Ijara with transfer of ownership
In the form used for financing, a separate undertaking provides that at the end of the contract the asset is sold or given to the lessee.
- Rent during the contract.
- Transfer of ownership by a distinct contract, at the end.
- The asset stays the financier's property until transferred.
Points to watch
Check who pays insurance and maintenance, what happens in case of delay, and the final transfer price. Ask for a full rent schedule and compare with other offers. Have your contract's details validated by the institution's compliance board.
Frequently asked
Is ijara only for property?
No. It also serves for vehicles, equipment or business premises, wherever a durable asset can be leased.
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