Islamic Ijarah

Car Ijarah: theoretical vs. Practical

Although as the word Islamic Banking strikes our minds, it is conquered with interest free banking but our minds do not realize perks involved in it when most of the world is following other type of system. It is the responsibility of the Islamic banks to take care of the reasons for what they call their selves “Islamic” Banks. Islamic banking is not only interest free banking but it also forbids dealing in financial risk (seen as a form of betting) and prohibits investing in impermissible business (prohibited or forbidden).

In the recent years, idea of Islamic banking got incredible consideration both in territory of academic and applied research. Practically all the principle banks in Pakistan offer diverse Islamic products keeping in view the needs and wants of the clients.

One of the most widely used Islamic banking products is Ijarah (leasing, in terms of conventional banks). Ijarah is a type of sale contract in which benefits related to a durable good are sold rather than the ownership of the good. It may be a rental or hire contract.

This article intends to know about the Islamic rules for Ijarah and examine whether auto Ijarah offered by Islamic Banks is in line with Islamic rules.

The basic Islamic concept about ijarah is that It is a contract in which the owner of the fully identified assets gives his asset to someone for a clearly determined specific period of time on an agreed consideration. The Lessor must keep the ownership with himself and must give only the usufruct to the lessee.

Some of the Islamic scholars say that the ultimate purpose of Ijarah is to give and lend money on interest but the name has been changed to Ijarah just for tax savings. Other scholars reject this objection and justify car Ijarah by saying that it follows all the rules set by Islamic Fiqha. But on the other hand those who oppose car Ijarah say that car Ijarah was allowed only for an overnight period and it is not a permanent...