Ijara

Product operation

TheIjara is a lease with an option to eventually purchase (Ijara wa 'iktina) And is related to a leasing transaction.

Its principle is to purchase an asset(1)by an entity (usually a bank or SPV) which then leases to third. The tenant, in exchange for the enjoyment of the property gives the owner a rent.

The principle is the same as a lease-purchase conventional finance.

TheIjara is often used as an underlying structure for more complex financial products such as bonds or Sukuk we present in 2.2.4. below.

In addition, theIjara wa 'iktina combined with a contract mucharaka allows decreasing, the United Kingdom, provide a financing offer to private property.

The buyer gets a mucharaka decreasing to buy his property. The bank hired out the part that belongs to the period necessary to repay its debt.

The monthly payment includes the rent and the share repurchase of the property. It is important to understand that the property remains the property of the bank throughout the term of the lease.

Regulatory aspects, legal and tax treatment in French Law

TheIjara can be likened to the lease as we have seen in paragraph 2.2.2.2. This contract is governed by Article L313-7 of the Code monétaire et financier.

There are no plans at present to make any changes to this law, theIjara could very well fit into it.

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