Ijara

Ijara is similar to a conventional finance lease. The financial institution leases an asset to a lessee in return for agreed rental payment. The terms of Ijara leases differ from those found in a conventional finance lease because, in order to comply with Sharia, the financial institution takes on some of the commercial risks (such as damage to or loss of the asset) more usually associated with operating leases. Typically, the Ijara will be proceeded by a transaction which gives the financier title to the asset, such as a sale or Istisna'a.