Ijara Wal Iqtina - ijaraCDC

Ijara Wal Iqtina

Islamic Finance Method Topics : Ijara, Musharaka, Murabaha, What is Riba?


Islamic banking and finance, also known as participant banking and finance is a type of banking activity that is conducted in accordance with Islamic law or Shariah. When banking and financing practices are conducted in accordance with these specific rules of conduct and order, then they are said to be benefiting all involved parties without the potential for risk or damage. When Islamic people are doing business in other countries, finding lending institutions, banks and sellers that adhere to these laws of Islamic finance is the best way to make sure that you are not being taken advantage of.

There are a number of different terms that you should be aware of when it comes to Islamic finance, whether it be for buying and selling, leasing, borrowing or lending. One of these terms that you should be aware of is Ijarah-wal-iqtina and everything that this particular term entails, is going to play an important role in allowing you to protect yourself.
Basically speaking, Ijarah-wal-iqtina is a contract that allows an Islamic bank to provide customers with an asset in a leasing or renting format. The Islamic bank will provide the client with building, equipment and other assets against some agreed rental. This is paired with a unilateral undertaking either by the client or by the bank that when the lease period has ended, the entire ownership of the asset is going to be transferred over to the lessee.
This promise or undertaking does not need to become an integral element of the lease contract in order to make it a conditional contract. The rentals involved in the process as well as the price of the purchase are going to be fixed in a specific way. The manner in which these prices are fixed allows the bank to recoup its entire principal sum along with a profit across the period of the lease so that everyone benefits.
While many aspects of Islamic finance are not different from traditional financing topics around the globe, there are many elements of Islamic finance that have to be done in a specific way in order to make sure that everyone is benefiting and no one is being taken advantage of. One of the greatest benefits of the way Islamic finance is run is that because lending institutions and banks cannot profit unreasonably, everyone is going to benefit and no one is going to be taken advantage of.