Ijarah (Leasing Contract)
Definition of Ijarah
Ijarah (Lease) is a contract whereby the owner of an asset, other than consumables, transfers its usufruct to another person for an agreed period for an agreed consideration.
Legitimacy of Ijarah
The Sunnah of the Prophet Muhammad (SAW) refers to lease contract as follows;
The Prophet (SAW) said: “Pay the hired worker his wages before his sweat dries off”. (Sunan Ibn Majah).
The Prophet (SAW) is reported to have said: “He who hires a person should inform him of his fee.” (Al-Sunan Al-Kubra li Al-Baihaqi).
Abdullah ibn Umar narrates, “Allah’s Apostle gave the land of Khaibar to the Jews to work on and cultivate and take half of its yield.” Ibn ‘Umar added, “The land was used to be rented for a certain portion (of itsyield).” (Sahih Al-Bukhari).
The Modern Application of Ijarah in NRSP
Ordinary Ijarah can be used for lease of plant, car, vehicles and equipment, real estate, durable goods, etc. whoever in NRSP we use Ijarah mostly for leasing of agriculture equipment, motorcycles, auto rukshas and car as under;
- The bank buy leasable assets from the market as customer demand.
- The bank then lease those assets to clients for agreed period.
- The user pay rentals to the bank as per agreed rental schedule.
Product Feature of Ijarah financing
This financing scheme is for 3 to 60 months under Ijarah Shariah mode in which corporate, SME, agriculture, livestock, salaried and Pensioner can get financing facility for purchase of car, Tractor and commercial vehicles with upper limit as per regulation and eligibility criteria of the bank.
|Name of the product||Rozgar Ijarah/ Ijarah Bike|
|Underlying Islamic mode||Ijarah|
|Type of product ( Corporate, SME, Agriculture, Consumer, Commodity Finance, etc.)||SME, Consumer & corporate|
|Minimum and Maximum financing limit||Minimum limit PKR 50,000/- Maximum 350,000/-|
|Tenors (minimum and maximum)||Minimum 3 Months - Maximum 24 months (36 for Corporate Clients)|
|Rental Rate||As per SOC's|
|Target Customers||SME, Agriculture & Consumer|
|Security/collateral Required||Cash Security, Un-dated Cheques, Demand Promissory Note,|
|Other salient features/services||For the purchase of Bikes, Rickshaw, Female Scottie etc.|
|Launch date of the product||With the approval of SBP|