**Nur Adlina Adli DIA 101006*Siti Humairah Hasim DIA 101014*Nor Asiyah Ismail DIA 101017*Muhd Aiman Rahim DIA 101028
**Comes from the word ajr meaning reward or wages for work done or services rendered.*In fiqh means a contract for hire of persons or services or ‘usufruct’ of a property.*In Islamic banking point of view, refers to an Islamic leasing contract of land, property or equipment which is leased to a client for a stream of rental payment.
* Operating ijarah Muntahia bit tamleekSituation Contracts that do not Contracts that end up with the end with the transfer transfer of ownership of leased of ownership of leased assets to the lessee. assets to the lessee.Transfer of - Gift at the end of periodownership - Token of sale consideration at the end of period - Sale at specified amount - Sale during the lease period for the remaining installments - Gradual transfer during lease period
* Beneficial use Transfer of asset of asset Financier EntrepreneurVendor (Lessee) (Lessor) Payment of Lease rentals purchase price* Another popular instrument – 15% of the transactions* Right available to lessee to purchase* Asset ownership risk with owner; operational risks with lessee* Features close to a financial lease* Used for machinery, equipment, property, vehicles, aircraft etc.
* . . VENDOR ISLAMIC BANK Agreement CUSTOMER* The customer approaches the Bank with the request for financing* The Bank purchases the item required for leasing and receives title of ownership from the vendor* The Bank makes payment to the vendor* The Bank leases the asset to the customer* The customer makes periodic payments as per the contract* The asset title transfers to the customer based on the method disclosed in the agreement
* Gift at the end of the period:- The ownership of the asset is transferred to the lessee for no consideration by entering into a gift contract in fulfillment of a prior binding promise, upon the settlement of the last lease rental payment.* Sale for a token consideration at the end of the Ijarah contract:- Initially there is a Ijarah contract and a promise to sell to sell by lessor if the lessee wishes at a token consideration. The consideration can be any agreed amount between the parties.* Sale at the end of the lease for an amount specified in the lease:- This is done through an Ijarah contract together with a promise to enter into a sale contract. The sale contract will include the amount to be paid after the expiry of the Ijarah contract.
* Sale during the lease period for the remaining installments:- Executed together with a promise to sell the asset to the lessee, whenever the lessee wishes to buy the asset during the period of the lease for a price equal to the remaining installments.* Sale through gradual transfer of title:- Gradually transfer the title of the asset to the lessee until the asset is fully transferred. The price need to be determined so that a proportionate share is transferred at every period.- There needs to be a sale contract for each transfer and a reduction in lease rental as the ownership of the bank decreases. In case the Ijarah contract is revoked prior to complete transfer, the property will be jointly owned by the bank and the ex lessee.
**The wording: which includes an offer and acceptance*Contracting parties: a lessor (owner of leased assets) and a lesser (the party who reaps the services of the leased assets)*Subject matter of the contract: which includes the consideration (rent) and the benefit from the use of the asset.
**The basic rule of the Ijarah is that it should be executable.*If the commencement is not stipulated, then the Ijarah will start from the time of the contract and will be executed as from that time.*An Ijarah contract according to which execution of the contract is deferred to a future date is valid.*An Ijarah cannot be made contingent on a future event or a condition.
**Both parties should be of sound mind and judgement.*An Ijarah is valid if the contracting parties is a competent person who is qualified to dispose of funds.*They should have the mutual consent.*For the purpose of enforceability, the lessee should have the authority to act in order to create a contract.
*Benefit RentConsists of two parts: - Is what the lessee is- The contract should include committed to pay as a the use of a benefit of a consideration for the benefit specified asset. enjoyed by him.- The contract should include a - The majority of fuqaha have known act. permitted the payment of rent in the form of services.Conditions: Flexibility in determining the- The benefit of using the rent: asset, not the use of it as - Can be determined in terms such, should be the subject of time, place and distance. matter of the Ijarah. - Example: ‘if you sew me this- The benefit should be subject dress on this day, its charge to valuation. No agreement will be RM`00’ can be concluded on what is considered permissible but does not have a price.
Benefit Rent- The fulfillment of the benefit Entitlement of the rent and its should be of a permissible due time: nature. - Entitlement to the rent rent- Ability to fulfill the benefit does not come a right as per should be real and in the contract itself accordance with Shari’a - Rather, it becomes right by- The benefit should be fulfilling the condition in the identified in such a way as to contract or by subject matter. remove lack of knowledge (Jahala) which leads to dispute.
** Making the leased asset available- Includes equipping and preparing the asset in the manner which the specified benefit to be enjoyed.- The lessor is obliged to rectify if anything happens during the period of the lease that prevents the lessee from enjoying the benefit, for a reason not attributable to the lessee.* Guarantee in respect of defects- In Ijarah, the option of defect is treated as is sale. The defect which entitles a lessee to an option is one which causes an impairment in the benefits which are the subject matter of the contract.- The lessee shall have the option of revoking the contract or accepting the impaired benefit while being obliged to pay the full rent.
** The lessee is responsible for keeping the leased asset intact and for payment of the rent.
* Financial Accounting Standard No. 8 (FAS 8) sets out the accounting rules for recognizing, measuring, presenting and disclosing Ijarah and Ijarah Muntahia Bit Tamleek transactions. 1. 3. 4. 2. Leasing Expenses DisposalAcquisition of assets and Gains / of assets Revenues Losses 3a. 3b. 3c. Initial Depreciation Ijarah expenses & revenue maintenance
* Operating Ijarah in the books of the lessor.1. Assets acquired for Ijarah:- Assets acquired is recognized at historical cost.- This includes net purchasing price plus all expenses necessary to bring the asset to intended use.- Example of expenses are custome duties, taxes, insurance.2. Ijarah revenue:- Should be allocated propotionately to the financial period of the lease term.- Presented in the income statement as Ijarah revenue.
3. Direct initial cost:- If material, should be written off as incurred. If immaterial, should be allocated over the lease periods.4. Repairs of leased assets:- Repairs necessary to secure the services of the leased assets, if immaterial, should be written off in the period, while if repairs are material and varied, a provision is set up by regular charges to income.5. At the end of the financial period:- Amortization of initial material direct costs, cost of repairs to be charged against provision, depreciate assets, Ijarah installments receivable to be at cash equivalent.