UDLF offers Ijarah facilities for a range of approved assets and aims to provide competitive rates with flexible terms and conditions.
How Ijarah works
Ijarah is a transaction that transfers the usufruct—the right to use an asset—to another person for an agreed period and consideration. Unlike a sale, an Ijarah agreement may be arranged to take effect on a future date.
In asset finance, the institution purchases the asset, sometimes through the customer acting as its agent. The lease relationship begins only after the customer has taken delivery of the asset. Rent should not be charged for a period before delivery.
Two distinct relationships
- Agency stage: the client may act as an agent of the institution to purchase the asset on its behalf.
- Lease stage: once delivery takes place, the relationship of lessor and lessee comes into effect.
Shariah principle
Rent is linked to the delivered asset and its use, not simply to the payment of money.