Leasing (Ijarah)
Ijara is a lease agreement under which an asset is leased out by the lessor to a lessee against specific rent or rental for a fixed period. Ijara contract is used to finance lease for items such as equipment, machinery, IT infrastructure, motor vehicles, real estate, buildings and other goods; except all that is considered haram or prohibited in Islam.
Two fundamental principles of Islamic finance we abide by are:
- As a lessor, RentCo owns the assets for the full lease period.
- If the lessee defaults on payments or delays payments, the lessor cannot charge compound interest.
- The leased asset’s use is specified in the contract.
