A shari‘ah analysis of issues in Islamic leasing

Abstract EN

This essay is presented in two parts and several sections.

The first part provides a fairly detailed examination of the fiqh rules pertaining to the contract of ijarah.

It begins with the definition of ijarah and reviews the leading schools of Islamic law on the basic conditions and requirements of this contract.

This is followed by a review of the two varieties of ijarah known to the market, namely operational lease, and financial lease.

The discussion proceeds with a review of contractual options (khiyarat) and their relevance to ijarah, liability for loss and insertion of penalty clauses in the ijarah, and then the fiqh rules pertaining to the termination of this contract.

The second part of this essay deals with the sukuk (bonds) in general and the Islamic bonds in particular.

It also discusses potential benefits of Islamic bonds and their effects on economic development and examines experts' opinions on issues of concern to Islamic bonds that have drawn the attention of commentators.

A brief review of some recent issuances of Islamic bonds is followed by a discussion of hybrid assets in the sukuk.