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Ijarah
Ijarah came from the root word أجرwhich means compensation or عوض. It
also means the sale of usufruct. Legally it is defined as a contract to use the usufruct
of a thing or the services of a person in return for compensation. The subject matter of
the Ijara contract is the usufruct or the service that is rendered by an employee. In rent
the right to use the property is transferred to the tenant and not the ownership of the
property. Although the usufruct or the service is non-existent at the time of the
Although Ijarah is the sale of the usufruct, it is distinguished from the sale by the fact
Things which if used could be consumed can not be hired. For instance fruit,
food or, money cannot be rented as they are considered perishable properties. Usufruct
is derived from usable properties while service which also comes under the category
Similarly it is not allowed to rent a cow for its milk or a tree for its fruit because the
milk and fruits could not be classified as usufruct as they are tangible things. Usufruct,
on the other hand, refers to abstract and intangible benefit that is derived from a
certain property such as the shelter from a house or a lift from a horse or car, or
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Legality of Ijara
و رفعنا بعضهم فوق بعض درجات ليتخذ, نحن قسمنا بينهم معيشتهم في الحياة الدنيا,أهم يقسمون رحمت ربك
“Is it they who would portion out the mercy of thy Lord? It is We Who portion out
between them their livelihood in the life of this world: and We raise some of them
above others in ranks, so that some may command work from others. But the mercy of
thy Lord is better than the (wealth) which they amass.” 43: 32
“If you decide on a foster-mother for your off spring there is no blame on you,
provided you pay (the mother) what you offered, on equitable terms.” 2: 233
And if they suckle your (offspring) give them their recompense.” 6 :65 الطلق
فجاءته إحداهما تمشى على استحياء قالت إن أبي يدعوك ليجزيك أجر ما سقيت لنا
“Afterwards one of the (damsels) came (back) to him, walking bashfully. She said:
“My father invites thee that he may reward thee for having watered (our flocks) for
us.” 25 : 28 القصص
“Said one of the (damsels): O, my (dear) father; engage him on wages: truly the best
of men for thee to employ is the (man) who is strong and trusty.”
Hadith:
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“Give a servant his fee before his sweat dries up.”
Types of Ijarah
Ijarah or lease could generally be divided into two: Lease for the usufruct and
lease for the service. Lease for the usufruct could be both for movable assets such as
car, jewellery, and cloth. It can also be for immovable asset such as house, and
buildings. Lease for the service is also divided into two: Special employee الجير الخاص
who works for one employer for a specific wage. He is employed for a known period
and a well-defined service. During the period of the contract he is not allowed to work
what he does and now he does it. الجير العامpublic or general employee, on the other
hand, is his own master and works for himself. A tailor, a carpenter, a shoe-maker, a
employees. They may work for more than one employer. No one can stop them from
working for others. However, a general employee must provide what he has contacted
to provide in the way of work or services, through he can determine his own method
Accrding to the Hanafiis Ijarah has two pillars of offer and acceptance. To the
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2. The parties العاقدانwhich include both the landlord /Employer جَرا
ّ مَؤand the
tenant/employee مستأجَرا.
3. compensation, payment, salary, أجَرا,أجرة
4. usufruct, service منفعة
1. The manfa’ah should be known. This is possible when the leased asset is seen
and the usufruct or the service is clearly defined and the duration is clearly
2. Since it is impossible to deliver the manfa’ah, the asset from which the
that is not suitable for stay or a car that cannot be driven cannot be rented as it is
4. The usufruct should be permissible and be used for lawful purposes. For instance
5. The service should not be obligatory on the person who rendered it. Anyone
who does an action which is obligatory on him is not rewarded for that action or
render a certain service. For instance, a wife cannot demand wages for doing
household jobs or for breast-feeding the child. These are jobs which she is legally
provide care to the child, but not her mother if she is not divorced.
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6. The service rendered should not benefit the employee. أن ل ينتفع الجيلر بعملله.
Ijarah is not allowed where an employee has his own interest in the work done.
For instance, a partner may not lawfully be employed by other partners to manage
is also a partner in the same partnership. He, however, may receive a higher
percentage in the profit compare to other partners who do not contribute to the
management.
7. The usufruct should be used for the same purpose for which the asset is rented.
The usufruct could also be shared among a number of lessees provided the asset is
1. That the payment ( )أجرةshould be declared to the employee and known clearly
“Anyone who employs an employee should make known to him his salary”.
The payment could be made in advance or postponed to the end of the leasing
period. It is also possible to make partial payment. The Hadith of the prophet
Ijarah is for a certain period it is then necessary to pay at the end of that period.
For instance, a house is rented for one month. The payment has to be made at
the end of that month. If the Ijarah is for a certain work the payment has to be
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2. كون الجرة جزء من المعقود عليهThe majority of the Fiqh Schools are of the opinion that
Ijarah becomes void if a person is employed with the condition that he would be
employee who is picking up fruit is being paid in fruit. He may not need the fruit
and has to sell it in most probability for a lower price. Similarly, it is not allowed
if the owner of a taxi employs a driver for RM 100 to be paid from his daily
earnings. It is void because there is the possibility that there may not be enough
earning on a particular day as a result of which the driver may be paid less or not
paid at all. These Schools rely on the Hadith of the Prophet p.b.u.h. The Hadith
states:
The Hanafiis have derived a general principle from this Hadith. The principle
is:
The Malikis, and Hanbalis, on the other hand, argue for the permissibility of
paying the employee from the proceeds of his work provided the payment is
The lessor has to bear the risk of loss and un-deliberate destruction of the
asset. He also has to bear all capital expenditure (depreciation) and other
insurance instalments related to that asset while the lessee should bear current
expenditure that may be necessary for utilizing the asset during the leasing
period. If the lease asset is not in good working conditions and has a defect,
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the lessee has the option to cancel the contract or to continue with it. After the
end of the lease period, the lessee is under obligation to return the asset to the
owner.
It is permissible to sell the leased subject provided the purchaser knows and
irrevocable. All terms and conditions, rights, and liabilities agreed upon in the
lease contract will be transferred to the new owner. However, if the purchaser
is not aware of the lease, he has the right to rescind the contract. The lease
Termination of ijarah
4. According to the Hanafiis if either of the parties dies. They argue that usufruct
is not property and as such cannot be inherited. The majority of the Schools
consider usufruct a form of property and allow the Ijarah to continue until its
stipulated time.
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6. Lapse of the appointed time. For example if the contract is for one year it is
Islamic banks use the lease for the usufruct as an instrument of financing. The
bank purchases the asset and rents it out to the customer in return for rental. The bank
1. Operational Lease.
The bank purchases and maintains assets which have a high degree of
marketability. The bank rents these assets to other parties on terms and conditions
agreed upon for a specific time. After the termination of the period the asset is
returned to the bank. The bank then leases the same asset to a new lessee. The bank
bears the risk of recession or diminishing demand for these assets. At the end the bank
Operational lease is suitable for assets which are expensive and their purchase
requires a great amount of money such as aeroplanes, ships, industrial equipments and
It is due to these factors that there is increasing demand for leasing these assets. The
bank benefits from the transaction by retaining the ownership of the asset while at the
same time gets a return by leasing it. The lessee also benefits from the transaction as it
meets his immediate need and saves him from buying the asset at a much higher cost.
2. Hire-purchase-Financial Lease
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It refers to a type of ijarah that ends with ownership. Here the bank purchases
the asset based on a promise from a customer. The customer promises to own
the asset through lease. The asset will not be returned to the bank at the end of
the lease period, as is the case in operational lease, but will be bought by the
lessee. The rental is calculated based on the value of the asset which is
Operational lease is different from financial lease in a way that the former does
not offer an option to the customer to buy the leased asset at the end of the
lease period while in the latter the option is offered. If a lessee chooses to buy
the asset a new contract will be concluded. All the lease rentals previously paid
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