CHAPTER 7Ijara
INTRODUCTION TO IJARA
The term Ijara is derived from the root word ‘ajr’, which means reward or wages for work done or services rendered. In the financial world, Ijara is a bilateral contract involving transfer of the use of an asset for an agreed period for a consideration. It involves two parties: the lessor or Muajir, who is the owner of the asset and the lessee or Mustajir, who uses the asset. The owner of the object temporarily transfers its usufruct to the lessee for the agreed period and the lessee should be able to derive benefit from it without consuming it. The ownership of the leased asset remains with the lessor, along with all risks pertaining to ownership. The physical possession of the asset is held on trust by the lessee, who is not liable for any loss, destruction or reduction in value of the asset, unless caused by misuse or intentional negligence by the lessee.
In Islamic jurisprudence, the term Ijara is used for two different situations. One, as in the case of a conventional lease, is the transfer of the usage of an asset, while the other is ...