Ijarah is a Shariah-compliant leasing arrangement in which one party grants another party the right to use an asset for a specified period in exchange for rental payments.
Ownership of the asset remains with the lessor, while the lessee obtains the right to benefit from its use under agreed terms and conditions. The asset being leased must be lawful, identifiable, and capable of delivering the intended benefit.
Ijarah is widely used in modern Islamic banking for home financing, vehicle leasing, equipment financing, and commercial real estate transactions. In some structures, such as Ijarah Muntahia Bittamleek, ownership of the asset may eventually transfer to the lessee at the end of the lease period through a separate sale or gift arrangement.
Unlike conventional interest-based lending, Ijarah derives returns from the usufruct, or beneficial use, of an asset rather than from lending money for interest. It reflects the Islamic principles of asset-backing, transparency, and risk-sharing between contracting parties.