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Ijarah means 'to give something on rent'. In Islamic law, it's used in two different situations. The first has to do with one person hiring the services of another person. The second situation involves transferring the right to use (usufruct) a particular property in exchange for rent. This second situation is equated with leasing.
Ijarah is similar to conventional leasing in transferring the right to enjoy the asset to the lessee while the ownership remains with the lessor (person/business providing the asset). It's similar to a financial lease in the possibility of transferring the title to the lessee at the end of the leasing period in return for an additional payment. The transfer of the title and the additional payment are presented in a document separate from the lease.
For more information, go to Academy for International Modern Studies' web site at www.LearnIslamicFinance.com to see Study Notes on Ijarah. Also, see Irish Tax and Customs' web site at www.revenue.ie for Tax Briefing Issue 78: Ijarah.
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What is different between conventional leasing and Islamic ijarah?
yes
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