Ijara mortgage is the most popular form of Islamic Financial agreement. Both individuals and commercial entities who desire to secure properties take advantage of Ijara for business.
The benefits of this for businesses span two diverse kinds-ethical and commercial. Understanding its benefits from both these perspectives will help you appreciate the features of these acquisition options.
Ijara for Business Benefits From the Ethical Perspective
Ijara transactions show many similarities to other types of Islamic financial agreements, as both see roots in Sharia law. Sharia is a body of law that dictates the codes of conduct for Muslims in both personal and professional transactions. Understanding the Sharia rules governing financial transactions is essential to see its benefits from an ethical standpoint.
Per Sharia law, there’s a prohibition against charging and receiving interest in a financial transaction. This follows from the basic mottos of the Sharia, which are justice and partnership. It also relates to the fundamental rule that money cannot be used to generate money.
Due to the restrictions, Muslim business owners find it challenging to go for traditional interest-bearing mortgage or loan settlements. This presents an opportunity for alternative means of Sharia-compliant property acquisition.
Ijara For Business Benefits From the Commercial Perspective
For Business Owners
Because of the flexibility of Ijara for business, any business can take advantage of the benefits. Specifically, ijara mortgages do not impose upon the lessee the condition to buy the asset being leased at the end of the leasing period. It’s a win-win for business owners choosing not to own assets yet want to reap the perks.
Additionally, the conditions of an ijara transaction make it binding on the lessor to bear all the risks associated with asset ownership. This lets the lessee, or the business owner, enjoy the rights of use by only paying the rental amount at fixed intervals.
For Small Businesses
Mostly due to lack of funding, many small businesses or startups can’t always use assets for profit. With Ijara loans, they can use the assets immediately after making the first mortgage payment.
Furthermore, the lessor can transfer the asset’s right of ownership to the lessee at the end of the leasing period. They can enjoy the benefits of using the asset without buying it outright and exercise their right to own the asset for long-term usage.
Building a Stronger Business with IjaraCDC
Looking at these points, businesses can benefit a lot from Ijara transactions. It helps small and medium businesses stay afloat during hard times while propelling their brand forward.
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