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    AL-IJARAH AL-IJARAH Presentation Transcript

    • MAHYUDDIN KHALID  emkay@salam.uitm.edu.my
    • DEFINITION  Literally: DEFINITION  Ijarah came from the root word which means compensation or . It also means the sale of usufruct. EVIDENCES  Technically:  A contract of proposed and known usufruct with a specified PILLARS and lawful return or compensation for the effort or work which has been expended.  It is used to express the sale (bay‟) of a known benefit in TYPES return for its known equivalent. OPINION OF SCHOLARS  Usufruct:  The usage of shelter for house, transportation for vehicles and others for a fee.APPLICATION  Services:  To work using physical energy or skills such as lifting goods, cleaning of office, writing, lecturing, and others for a fee 3
    • NATURE OF AL-IJARAH  Lease is a contract by which the owner of land, a DEFINITION building allows another person to use it for a specific time, usually in return for a rent EVIDENCES  Al-Ijarah means a lease contract as well as a hire PILLARS contract.  Al-Ijarah, is also known as al-Kira‟. It is like TYPES someone who is selling to someone else a right to benefit or as a payment for services with a certain OPINION OF SCHOLARS price to be paid for it.  In the context of Islamic banking it is a leaseAPPLICATION contract under which the bank or financial institution leases equipment or a building to one of its clients against a fixed charge. 4
    • DIFFERENCES OF OPINION OPINION REASON DEFINITION Forbids Some jurist Ijarah is the sale of usufruct or services, contract of including and services is something intangible and EVIDENCES Ijarah. Hassan al- does not exist at the time of contract. Basri, al- It only can be achieve gradually over Nahrawani and certain period and something that not exist PILLARS others cannot be sold. It is not permissible to associate bay‟ TYPES (trade) with something that could only be realized and achieved in the future OPINION OF Allowed Majority of Even though usufruct does not exist at the SCHOLARS contracts of jurist including time of contract, normally it could be Ijarah Ibn Rushd realized or achievedAPPLICATION This type of usufruct or benefit could ordinarily be accomplished, or its accomplishment or non-accomplishment is rather similar 5
    • EVIDENCE  Hadith: DEFINITION  “Give a servant his fee before his sweat dries up”  (Al-Baihaqi) EVIDENCES  Reported by Ibn Abbas to the effect that Prophet (s.a.w) had himself cupped and gave the person who cupped PILLARS him his remuneration, if it is prohibited he would not have paid him in the first place. TYPES OPINION OF  Ijma‟: SCHOLARS  The ummah had came to a consensus during the time ofAPPLICATION companion on permissibility of Ujrah since the need of people for usufruct is similar to their need to physical good. 7
    • PILLARS OF AL-IJARAH 1. Muajjir: DEFINITION  A person who give something for hire – Lessor, landlord, owner etc. EVIDENCES 2. Musta‟jir:  A person who takes on hire – Lessee, tenant, renter etc. PILLARS 3. Ma‟jur:  A thing given for rent TYPES 4. Al-Manfaah: OPINION OF  The benefit from a thing – usufruct, services etc. SCHOLARS 5. Ujrah:APPLICATION  Price or fee given for the payment of rent or lease 6. Sighah:  Offer (Ijab) and Acceptance (Qabul) 8
    • TYPES OF IJARAH DEFINITION Tangible asset EVIDENCES Based on Subject Matter Labour PILLARS Ijarah TYPES Description of asset OPINION OF SCHOLARS Operating leaseAPPLICATION Based on The Contractual Relationship Financial lease 10
    • TYPES OF IJARAH Based on Subject Matter of the Leased Asset DEFINITION 1. Ijarah ‘Ain • To lease the usufruct from the specific goods or asset • Comprises all tangible assets. EVIDENCES • E.g.: property, transport, facilities and factories, etc. 2. Ijarah ‘Amal • To lease out the works or self skills PILLARS • Two type of workers: 1. Employee : person/entity that work only for the interest of a particular employer or independent contractor; TYPES does not have right to work for any other lessee during contract. OPINION OF 2. Independent contractor: offer services to the general SCHOLARS public • E.g: consultant, lawyer, contractorAPPLICATION 3. Ijarah • Form of ijarah where asset need to be described in Mawsufah fi advance al-Zimmah • The leased item/asset is not available during contract • The asset must be delivered on a future agreed date • No requirement should be imposed for the rental 11 payment to be paid in advance
    • TYPES OF IJARAH Based on The Contractual Relationship DEFINITION 1. Operating • Original form of ijarah „ain Lease • Features of operating lease: EVIDENCES • Asset acqusition is in full ownership of the lessor – legal and beneficial ownership • Responsibility to maintain bear by the lessor in PILLARS administrative affairs and maintenance of asset; lessee only responsible in the maintenance due to TYPES the usage and has to pay rent per agreed. • Risk on the asset ander liability and responsibility of the lessor OPINION OF SCHOLARS • High risk in nature. 2. Financial • Normally used and offered by Islamic bank asAPPLICATION Lease financial intermediaries in: • Obtaining desired asset • Obtaining cash money for various purposes • Known as al-Ijarah Thumma al-Bay‟, al-Ijarah wa al- Iqtina‟ or al-Ijarah Muntahiyah bi al-Tamlik. 12
    • SUBJECT MATTER OF AL-IJARAH 1. Since Ijarah is the sale of usufruct, majority of jurist DEFINITION forbid Ijarah on trees and grapevines, since fruit are physical goods and Ijarah is the sale of usufruct and not physical goods. EVIDENCES 2. It is also not permissible to conduct Ijarah on animal for its milk; ghee, wool or offspring; water in the river or PILLARS well or canal since all these are goods, and not eligible to be under contract of Ijarah. TYPES 3. It is also not permitted to conduct ijarah on non-arable (not fit for cultivation) land which have ponds for OPINION OF fishing, canes and wildlife for hunting since all these are SCHOLARS goods. It is not legal to rent pond or lake for fishing. 4. Basic principle of Ijarah: every item that could beAPPLICATION utilized with its original substance and part consistently being conserved or preserved is allowed for Ijarah, and if not is not legal. 13
    • CONDITIONS OF AL-IJARAH  The conditions for Property DEFINITION 1. The property must be belong to lessor EVIDENCES 2. The property is known to both parties and is specified 3. The property can be acquired by the lessee for his use PILLARS until the end of tenancy or lease 4. The property should be in a good condition possible TYPES for leasing 5. It is the liability of the lessor to repair damages of the OPINION OF property in order to make it possible for leasing SCHOLARS 6. It is the liability of the lessee to ensure the cleanlinessAPPLICATION and safety of the property 14
    • CONDITIONS OF AL-IJARAH 7. The liability of the lessee over the property is under the DEFINITION concept of trust (wadiah yadd amanah). However, in the case of damages due to his negligence, the lessee is liable EVIDENCES to pay the compensation (dhaman). 8. The lessee cannot lease the property to another tenant and PILLARS the second contract is considered as illegitimate. 9. The sale of a lease property is legitimate. However, the TYPES lessee has a right to use the property until the lease contract has expired, where the property will then be OPINION OF SCHOLARS submitted to the buyer. 10. The concept of al-Wadiah is applied when the leaseAPPLICATION contract has expired and the lessee is still holding the property. 15
    • CONDITIONS OF AL-IJARAH  The conditions for Usufruct DEFINITION 1. The use of the service (usufruct) can be valued with money. 2. The usufruct must be valid according to Islamic commercial EVIDENCES law. 3. The lessee should be able to make use of the property on PILLARS lease. 4. The usage of the property should be made clear in order to TYPES avoid any argument. 5. The usufruct does not entitled the lessee to own the OPINION OF property. SCHOLARS 6. The lessee is not obliged to inform the lessor his intention forAPPLICATION using the property, except in the case of possible destruction. 7. The usufruct of property beyond its normal usage is considered as an act of intention. 16
    • CONDITIONS OF AL-IJARAH  The conditions for Payment DEFINITION 1. The amount of payment of rent must be known. If the payment is not in form of cash money, the goods in EVIDENCES return must be specified its quantity, types and its characteristics. PILLARS 2. The payment of rent can be made in advance. 3. If the condition for payment does not prescribed to be TYPES paid in advance, the payment begins when usufruct OPINION OF started. SCHOLARS 4. If the payment is made on daily, weekly or monthly basis, the payment should be made at the end of periodAPPLICATION unless otherwise stated on the agreement. 5. If the property cannot be used the payment is not obliged upon the user. 17
    • CONDITIONS OF AL-IJARAH  The conditions for Sighah DEFINITION  The contract of offer and acceptance should follow all the conditions of the contract of sale in Islam; i.e. it EVIDENCES should be on mutual acceptance, cannot be made in form of promises or an order and the offer and PILLARS acceptance should be the same. TYPES OPINION OF SCHOLARSAPPLICATION 18
    • DIFFERENCES BETWEEN IJARAH & NORMAL SALES IJARAH ELEMENT NORMAL SALES DEFINITION Based solely on a DURATION Does not permit any time predetermined time frame frame EVIDENCES as part of the requirement of the contract PILLARS A temporary contract with a NATURE A permanent contract TYPES specified time frame for its without any specified expiry and due time period of expiration OPINION OF SCHOLARS No time of ownership OWNERSHIP Transfer of ownershipAPPLICATION occurs Usufruct and services SUBJECT Physical Goods and property 19
    • MODERN APPLICATION 1. Simple ijarah DEFINITION 2. AITAB EVIDENCES 3. Musharakah mutanaqisah 4. Ijarah based credit card PILLARS 5. Sukuk ijarah TYPES 6. Ijarah rental swaps OPINION OF SCHOLARSAPPLICATION 20
    • AL-IJARAH THUMMA AL-BAY’ (AITAB)  AITAB also known as ijarah wa iqtina‟ ( ) or al- DEFINITION ijarah muntahiya bi-tamlik ( )  Definition: EVIDENCES  Owning the benefit of certain assets for a specific period of time, by paying an agreed sums of rental, with an agreement PILLARS that the owner will transfer the rented asset to the hirer at the end of the agreed period or during the period, provided all TYPES rental payments or installments have been made in entirety  In theory, the contract of AITAB shall consist of two OPINION OF SCHOLARS different contracts, namely: 1. The contract of lease (al-ijarah „ain)APPLICATION 2. The contract of sale (al-bay‟)  AITAB is a contract of leasing with a promise to sell the asset. 21
    • FLOWS OF AITAB  In AITAB, the contract of al-ijarah runs separately DEFINITION from the contract of al-bay‟. These stages are:  Stage 1: Executing the contract of true leasing (al-ijarah EVIDENCES „ain) PILLARS  Stage 2: Executing the contract of sale (al-bay‟) at a nominal value agreed upon by both parties. TYPES OPINION OF SCHOLARSAPPLICATION 22
    • FLOWS OF AITAB 1st: Contract of al-ijarah DEFINITION 1)Lease Agreement EVIDENCES 2) Rental Payment PILLARS TYPES FINANCIER ASSET CUSTOMER OPINION OF SCHOLARS 3) Sale AgreementAPPLICATION 4) Sale Price 2nd : Contract of al-bay‟ 23